Monsoon and Import Duty Cuts: A Recipe for Lower Food Inflation

A recent report by the Union Bank of India indicates that the combination of above-normal rainfall and significant reductions in import duties on edible oils is projected to alleviate food inflation in the following months. The slashing of import duties from 20% to 10% aims to lower prices for essential food items.

With the monsoon starting ahead of schedule and import duties cut in half, retail consumers are likely to see cost savings passed directly to them, easing edible oil prices within weeks. The southwest monsoon, arriving five days early in Kerala, suggests a promising season, with May rainfall exceeding the Long Period Average by 106%.

Nonetheless, there are cautionary notes about the persistence of heatwaves in northwest India and potential disruptions from extreme weather events. These factors could undermine positive trends, necessitating close monitoring. The Consumer Price Index also shows a promising decline, dropping to 2.82% in May 2025, thanks to reduced food inflation.

(With inputs from agencies.)