Cut in edible oil import duty, above normal monsoon likely to further ease food inflation: UBI

NEW DELHI: The recent above normal rainfall and a significant cut in import duties on edible oils are expected to support easing food inflation in the coming months, according to a report by Union Bank of India.

The bank noted that these developments could help reduce the prices of essential food items, although some risks remain as any weather disruption (floods / drought) which may result in an adverse inflation scenario. It said, “Above normal rainfall for the season coupled with slashed import duty on edible oils bode well for the food inflation in coming months”.

The government slashed import duty on edible oils from 20 per cent to 10 per cent on May 30, 2025. This move is likely to benefit retail consumers directly, as the reduction in costs is expected to be passed on to them, helping bring down edible oil prices in the next few weeks.

Additionally, the report highlighted that the monsoon season has started on a positive note. The southwest monsoon reached Kerala five days ahead of its normal schedule and has since advanced to many parts of the country.

In May 2025, India recorded 106 per cent more rainfall than the Long Period Average (LPA), indicating a strong start to the monsoon. The India Meteorological Department (IMD) has predicted that the monsoon will remain active during June.

However, the report also warned that heatwave conditions are likely to persist in northwest India in the first half of the month, which could impact weather-sensitive crops. Despite these positive indicators, the bank cautioned that any extreme weather events like floods or droughts could still disrupt the current inflation trend and push food prices higher.

On the inflation front, the Consumer Price Index (CPI) inflation for May 2025 fell sharply to 2.82 per cent, the lowest since April 2019. This is a significant drop from 3.16 per cent in April 2025 and is well below both the bank’s and market consensus estimates.

The fall was mainly driven by a sharper than-expected cooling in food inflation, especially in cereals and pulses. However, vegetable prices saw a slight increase after six months of continuous decline. The overall outlook remains cautiously optimistic, with strong rainfall and policy support likely to bring relief on the inflation front, provided there are no major weather-related disruptions. (ANI)