Experts have stated that the recent intense rainfall and hailstorms in Maharashtra, Gujarat, western Madhya Pradesh, and certain areas of Rajasthan may contribute to an inflationary impact, potentially pushing it to approximately 6% in the next three months. The surge in prices of pulses and onions is expected to sustain elevated food inflation during this period.
“Food inflation will continue to be under pressure, and I believe that 6% inflation can prevail over the next three months,” said Madan Sabnavis, chief economist at Bank of Baroda. “Rabi sowing is lagging and low reservoir levels can impact final crop outcomes,” he said.
According to data released last month, inflation dropped to 4.9% in October. However, during the same period, food inflation held steady at 6.6%.
Anticipated intensification in food prices is likely, following a significant surge in rainfall, amounting to a 682% increase over the long-period average (LPA) in the central part of the country, which is considered the core agricultural zone. This information is based on data provided by the India Meteorological Department (IMD) for the period between November 23 and November 29.
Agricultural experts reported extensive damage to both tur and onion crops due to unseasonal hailstorms and rainfall.
The government’s data reveals that Tur had experienced a notable reduction in acreage during the kharif season, standing at 43.87 lakh hectares as of September 29, 2023, compared to 46.13 lakh hectares on September 29, 2022.
The combined weight of onions and pulses in the retail inflation basket is 3%.
In October, the inflation for pulses surged to 18.8%, with tur prices witnessing a 40.9% increase compared to the previous year. This marked a higher inflation rate for tur compared to the 37.3% recorded in September. Despite the government’s attempts to boost imports by eliminating import duties, the impact on the situation was minimal.
Experts suggest that the inflation in pulses could continue to increase, given that the upward trend in tur prices has not subsided.
“In November, tur dal retail prices are tracking higher by 37.7% year on year, which will add around 0.3 percentage points to headline CPI (Consumer Price Index),” said Gaura Sengupta, economist at IDFC First Bank. “Overall, pulses prices on a CPI-weighted basis are tracking higher by 22% year on year in November,” she said.
Tur carries a 0.8% weight in the retail basket.
Experts suggest that onions, trading 79% higher than a year ago, could contribute an additional 0.5 percentage points to headline inflation in November.
Tanmay Deepak, an analyst at Agriwatch, an agricultural research firm collaborating with a million farmers, reported that the recent hailstorms in Maharashtra have caused damage to the onion crop in areas like Nashik and Ahmednagar.
“The arrivals (of onions to mandis), which should have peaked at this time of the year, have declined. This is pushing the prices up,” he said.
The unfavorable weather conditions causing a delay in kharif onion sowing have led to reduced coverage and a delayed arrival of the onion crop. With stored rabi onions (harvested in April-May) depleting and the delayed arrival of kharif onions, a tight supply situation has emerged, contributing to the increase in prices, as mentioned by Deepak.
According to government data, the nationwide retail price of this essential kitchen item surged by 94.39% to INR 57.85 per kilogram as of November 29, up from INR 29.76 per kg a year ago.
Experts warned that if rabi sowing does not pick up, the repercussions may extend throughout the remainder of the year.
“The impact of vegetable prices will be transient as there are multiple cropping seasons,” Sengupta of IDFC First Bank said. “Pulses price pressures could be more persistent.