E-Paper
Plunging rupee to make your daily meals costlier
The sharp fall in the rupee is likely to knock up prices of almost everything along the value chain from farm to fork, effectively negating gains from a potentially bountiful summer harvest, which otherwise would have tempered down food inflation. HT reports. Food for thought
Brace yourself for a dearer platter in the coming months.
The sharp fall in the rupee is likely to knock up prices of almost everything along the value chain from farm to fork, effectively negating gains from a potentially bountiful summer harvest, which otherwise would have tempered down food inflation.
Wholesale price index (WPI)-based inflation, India’s main gauge of economy-wide price movements, grew 4.7% in May — its slowest pace in 40 months — triggering hopes that the price hump may have been decidedly left behind, at least for the short-term.
The immediate impact of the falling rupee usually plays out through higher fuel costs.
“On the basis of our regression model, we estimate that a sustained 10% rupee depreciation, adds roughly 1 percentage point to headline wholesale price inflation,” banking major Credit Suisse said in a recent report.
India imports about 75% of crude oil requirements and higher prices of the commodity usually reflects in higher retail fuel costs.
A bloating crude import bill, therefore, normally has a cascading impact.
Higher diesel and petrol prices would knock up the cost of ferrying goods, including food items, across locations, which, in turn will push up overall prices.
It’s not just through soaring fuel costs that will push food prices. A weak rupee will raise prices for most manufactured and imported goods — a large component of a household’s monthly grocery consumption such as pulses and edible oil.
For instance, India is a net importer of pulses — a key staple for most Indian families. A weak rupee means it will push up the cost of dal.
Eating out could be costlier as restaurant owner are likely to jack up rates to cover for rising processed food and cooking fuel costs.
Edible oil and pulses import grew sharply by 15.5% and 26.2%, respectively, in 2012-13 compared to the previous year.
Higher prices can hurt family budgets hard, especially at a time when companies in India, squeezed by high input and borrowing costs, have offered meagre salary hikes and are holding back on expansion and hiring activities.
