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Food prices drive retail inflation to 3-month high of 4.81%
Poor families are disproportionately impacted by high grocery bills as they tend to spend a higher proportion of their monthly budgets on food.
Consumers will feel the pain of high food at least until September, analysts said on Wednesday, as the knock-on effects of last year’s lower output of key staples and torrential rains this month hammered household budgets.
Read here: Retail inflation in June reaches a 3-month high of 4.81% on rising food prices
Food inflation, as measured by the consumer food price index, leapt to 4.49% in June, compared to a 2.96% climb in the previous month, official data showed on Wednesday. Overall retail inflation rose to a three-month high of 4.81% as a result.
Untamed food prices could see a rise in retail inflation from the Reserve Bank of India (RBI)’s target of 4% again. In May, consumer inflation cooled to 4.5%, falling to the lowest level in two years . To be sure, the central bank’s tolerance limit for inflation is 4% plus or minus 2%, and this is the fourth straight month that the print is within that range, although RBI Governor Shaktikanta Das has categorically stated that the target is 4% (not 6%).
The Modi government has invoked a slew of anti-inflation measures to cool prices, including limits on how much stocks food traders can withhold, ahead of crucial assembly polls later this year and a general election due next year.
Despite these steps, prices of pulses, cereals and vegetables, such as tomatoes, turned out to be sticky, the data showed.
Consumers continued to fret about unprecedented price rise in tomato, a base ingredient of most Indian curries. Pulses, a common source of protein for most Indians, saw 10.53% inflation. Overall, vegetable inflation declined by 0.93%, but higher tomato prices more than offset the fall in other greens.
Sowing of short-duration vegetables has been disrupted by floods in many states, said Abhishek Agrawal of Comtrade, while Sonal Varma, an economist with the firm Nomura, said in a note that “higher prices are likely to persist” until August-September, when a sharp drop in food inflation could be expected.
Poor families are disproportionately impacted by high grocery bills as they tend to spend a higher proportion of their monthly budgets on food compared to other goods. “Tomato now costs more than chicken. I can’t afford it,” said Pintu Singh, a daily-wager from east Delhi.
The roots of the tomato crisis go back to last year’s extreme weather in states such as Maharashtra and Karnataka, followed by damage to crops this year too.
Read here: Food prices drive retail inflation to three-month high of 4.81%
Hailstorm in March, April and May destroyed large swathes of tomato crop in Maharashtra, a major supplier during the monsoon months, said Sunil Chavan, Maharashtra’s agriculture commissioner.
Climate-change-induced extreme weather has contributed to the pressing shortage, experts said. In 2022, abrupt rainfall followed by extreme heat led to an explosion in the numbers of plant viruses transmitted by aphids that feed on tomato plants in both Maharashtra and Karnataka, said M Krishna Reddy, a scientist at the Indian Institute of Horticulture Research, Bangalore. Such swings in weather in India are characteristic of climate change, the Intergovernmental Panel on Climate Change has repeatedly warned.
The Centre on Wednesday directed state-run food trading agencies, such as Nafed, to procure tomatoes from markets in Andhra Pradesh and Maharashtra to redistribute them to high-price centres, according to a statement.
Cereal inflation continued to be in double digits at 12.71%. The lack of sufficient buyers at an auction of state-owned rice on July 5, a move to replenish supplies, isn’t “discouraging because more than the quantity, the government’s intention was to send a signal to the market that the government has the stocks and can intervene in the market to bring down prices”, Union food secretary Sanjay Chopra said.
Read here: As rains, landslides hit supply, tomato rates touch ₹250 per kg in Chandigarh
The Reserve Bank of India (RBI), in its June monetary policy statement, has projected that inflation in the July-September quarter will be 5.2%, but said there could be upside risks to inflation from food prices if weather turns out to be unfavourable.
