Here’s a bold prediction: India’s food inflation might take an unexpected turn in the coming years, and it’s all tied to the monsoon rains and a little-known concept called the ‘base effect.’ But here’s where it gets controversial—while the second half of FY26 looks promising with better monsoons and improved sowing, FY27 could see a surprising spike in food prices. Why? Let’s break it down.
The latest update from ICICI Bank’s Global Markets sectoral report suggests that food inflation will likely stay in check during H2FY26, thanks to favorable weather conditions and increased agricultural activity. However, the report warns of an ‘adverse base’ effect that could push inflation higher in FY27. And this is the part most people miss—the base effect refers to how inflation appears unusually high or low based on the price levels from the same period the previous year. In simpler terms, if prices were unusually low last year, even a small increase this year could make inflation look higher than it actually is.
According to news agency ANI, the report highlights that while higher rainfall and sowing are positive signs for H2FY26, this adverse base effect could be a game-changer for FY27. This comes at a time when India’s wholesale inflation has hit its lowest point in over two years. In October, wholesale inflation dipped further into contraction, driven by a sharp decline in primary food articles. Vegetable prices continued to ease due to steady supplies and favorable weather, while cereals, pulses, spices, and fruits also saw price drops.
Month-on-month food prices remained stable, indicating that the rapid disinflation seen earlier is stabilizing. The broader primary articles category continued its contraction streak, with weak pricing in both food and non-food items. Here’s a thought-provoking question—could this stability be short-lived if the base effect kicks in next year?
The report credits corrections in key high-frequency items like tomatoes, onions, and grains for pulling down wholesale food inflation this year. Fuel inflation also remained negative, thanks to lower global crude oil prices compared to last year. While some petroleum products saw sequential increases, the overall fuel and power index stayed subdued. Inflation in manufactured products moderated as well, with easing prices in metals and industrial inputs. However, segments like jewelry, tobacco, pharmaceuticals, and select fabricated metals showed firming trends, hinting that global commodity movements could create upward pressure in the coming months.
Boldly put, the future of food inflation isn’t just about weather or supply—it’s also about how we measure it. What do you think? Is the base effect a hidden pitfall, or just a temporary blip? Let’s discuss in the comments!
