Food inflation has been the villain in retail inflation (CPI-based inflation) as it played havoc with the quest of RBI towards a lower interest rate. RBI governor Shaktikanta Das has constantly cautioned against food inflation which has, in turn, been blamed substantially on vegetable inflation. To break it down to layman’s terms, inflation linked to vegetable has prevented RBI from trimming interest rates.
Therefore, high vegetable prices have retained high interest rates that have, in turn, been responsible for higher EMIs in all types of loans – personal, home, auto and even education loans. Let’s see why vegetable prices have been so high over the past one year.
Rise in vegetable prices
Inflation in vegetables shot up to extremely high 48.73% in September 2024. In August, it was (-) 10.01% which helped soothe overall inflation to 3.65%.
Potato and onion registered inflation at astronomical rates of 78.13% and 78.82% respectively in September.
“The price of a kilo of potato is Rs 40 and above while onion is around Rs 60. I don’t see it coming down over the next few days, or perhaps even weeks,” said Dilip Mondal, who is a second-generation retailer of onion and potato at the Kasba CIT market in Ballygunge. “Earlier it used to be said potato is the staple of poor people, but they find it difficult to buy it now,” rued Mondal.
The Nagpur example
Mondal, who is in his forties, blames vegetable prices on the vagaries of rains. This year the rains have been particularly heavy in different parts of India. While rains have impacted crop in the field, floods affect harvest stored in warehouses and godowns. According to reports, vegetable prices rose by 400% in July this year, excessive rains being the culprit.
El Nino and poor rains in 2023
According to reports, extremely heavy rainfall was recorded on 22 out of 31 days in the month of August 2024. The corresponding number was 17 in August 2023. El Nino was the reason behind poor rains in 2023.
In 2023, scanty rains resulted in poor harvest and the resultant shortage sent prices through the roof. Thus in both poor and excessive rains, the harvest is affected resulting in supply constraints, triggering high prices.
In 2023, prices of tomatoes rose to about Rs 200-250 a kilo, resulting in a truck full of tomatoes being hijacked in July in Karnataka.
Vegetable prices seem to be the main trigger of food inflation that could jeopardise India’s movement towards a lower interest rate. Biz News Business News – Personal Finance News, Share Market News, BSE/NSE News, Stock Exchange News Today
