India may continue supply interventions to curb food inflation, Nomura says

MUMBAI, July 21 (Reuters) - The Indian government may continue with supply-side interventions, such as the recent restriction on exports of non-basmati white rice, to curb a resurgence in food inflation, economists at Nomura said in a note.

Soaring prices of vegetables and already-high prices of cereals are seen pushing inflation above 5.5% in the July-September quarter and could keep the central bank on guard, economists have said.

\“We expect continued supply-side interventions, with inflation likely to be above 6% levels in July and August, buoyed by sky-high vegetable prices,\” Nomura economists Aurodeep Nandi and Sonal Varma wrote.

The curb on rice exports also marks \“the latest in a series of supply-side interventions, highlighting inflation as a political priority, with state elections in the fourth quarter of 2023 and general elections in the second quarter of 2024,\” they said.

Rice inflation rose from close to 9% y-o-y in September last year to nearly 12% in June and daily data suggest a further rise in July, said Nomura, blaming the price increase on the late arrival and uneven spread of the monsoon.

Earlier this month, the government stepped in to procure tomatoes from certain centres to redistribute them in regions of high consumption to bring down prices.