Price hike on some food items transitory, elevated inflation warrants greater vigil: FinMin

Source: The post is based on the article “Price hike on some food items transitory, elevated inflation warrants greater vigil: FinMin”  published in Indian Express on 23rd August 2023.

What is the News?

The Finance Ministry has released its monthly economic review for July,2023.

What are the key observations made by the Finance Ministry?

Food Prices: Food prices had recently gone up but it’s expected to be temporary. Global factors, like Russia terminating the Black Sea Grain deal and domestic factors such as white fly disease and uneven monsoons influenced food prices.

– But the government has already taken steps to control food prices, and with new supplies coming in, prices should go down soon. 

– For example, tomato prices should drop by the end of August or early September, and importing more tur dal should help with pulse prices.

– However, inflation might still be a concern because of global uncertainty and local issues. The Government and the Reserve Bank of India need to keep a close eye on it.

Capital Expenditure: Capital expenditure measures taken by Centre have led to states also increasing their capex spending with states’ capex rising by 74.3% year-on-year in Q1 FY24 and Centre’s capex increasing by 59.1% in the same quarter.

– Enhanced provision for capital expenditure by the government is now leading to crowding in of private investment as seen in various economic indicators and industry reports.

Future Projections: Domestic consumption and investment demand are expected to continue driving growth.

– Government has been making various attempts to raise investment by the private sector.

– PLI and new-age sectors (such as green hydrogen, semiconductors, wearables and solar modules) are expected to account for nearly 17 percent of the capex between FY13 and FY27.