Agri prices may fall by two percent each in 2024 and 2025: RBI report
An average decline of seven percent in the prices of agricultural commodities is expected during the year 2023. If we look at the next two years, the prices of agricultural commodities are likely to decrease by two percent in 2024 and by the same amount in 2025.
An average decline of seven percent in the prices of agricultural commodities is expected during the year 2023. If we look at the next two years, the prices of agricultural commodities are likely to decrease by two percent in 2024 and by the same amount in 2025.
The Reserve Bank of India has said this in the Financial Stability Report released on December 28. It has been said that due to increase in supply the prices of agricultural commodities will fall.
The report says that the Food Price Index of the Food and Agriculture Organization (FAO) is witnessing a decline from the middle of the year 2022. In November 2023, it declined by 10.7 percent on an annual basis. The decline is expected to continue further as supply increases.
El Nino challenges food prices The war in the Middle East has had limited impact on commodity prices, according to the report. This shows that the balance of demand and supply has improved. However, the impact of El Nino on agricultural production is yet to be fully seen. Domestically, the effects of El Nino could pose challenges to agricultural production and food prices.
The report said that prices have come down in the global commodity market and better supply management at the domestic level will help in controlling food inflation.
Other commodities have also been mentioned in the RBI report. According to this, the decline in commodity prices in recent months is being challenged by the fighting in the Middle East and polarization happening at the global level.
According to the report, supply chain disruptions increased during the COVID-19 pandemic and the beginning of the Russia-Ukraine war. But after the improvement, the Global Supply Chain Pressure Index reached its lowest level in 26 years.
Rural inflation high, impact on demand possible
The report also assesses the demand in rural areas of India. It says that inflation is higher in rural areas than in urban areas. This trend has been seen in recent months. This may have an impact on the demand in rural areas.
Due to rising food prices, the inflation rate reached 7.4 percent in July 2023. After that it is gradually coming towards the medium term target of four percent. It was 5.6 percent in November 2023, but it fears the shock of rising food prices.
Regarding bank credit, the report says that bank credit to the agriculture sector remains in line with the performance of this sector. Recently the growth of the agricultural sector has been weak. Along with this, NPA of agricultural loans has also increased.
Recently, there has been some decline in NPA in the agriculture sector, yet its level remains high.
