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Food prices may be subdued, but only for a while -Surabhi

-The Hindu Business Line

Despite a lively debate in recent weeks on whether food prices have now moved to being structurally low, analysts believe that this is only a transient phenomenon and food prices, on a sequential basis, have already begun to rise.

Retail inflation may be at an 18-month low but prices, especially of food items, are likely to see a pick-up over the next few months with average inflation expected to be at about four per cent in 2019-20.

Despite a lively debate in recent weeks on whether food prices have now moved to being structurally low, analysts believe that this is only a transient phenomenon and food prices, on a sequential basis, have already begun to rise though they may be in the negative in a year-on-year comparison.

An exact timeline on when prices will begin to rise is difficult to predict, they said but believe that it is likely in the next three to four months.

“This is a transitory behaviour of food inflation as supply-demand mismatch pulls down prices. It is typical when there is a glut in agriculture,” said NR Bhanumurthy, Professor, NIPFP, noting that there are already signs emerging that the rabi harvest will be lower than expected and will lead to a contraction in prices.

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