Food factor: On food inflation 


May’s provisional headline retail inflation may have marginally eased to a 12-month low of 4.75%, but food price gains remained unrelenting last month giving little reason to cheer. Yet again, vegetables and pulses were key contributors in keeping food inflation as measured by the Consumer Food Price Index little changed at 8.69%, with urban consumers feeling the heat more than their rural counterparts as the pace of year-on-year change in food prices in India’s cities and towns hit a three-month high of 8.83%. Vegetable inflation not only continued to hover above 27% for a sixth straight month, at 27.3%, but month-on-month gains too accelerated by almost 200 basis points to a six-month high of 3.22%. Tomato, onion and potato prices led the charge, with these heavyweights in the vegetables sub-group logging sequential gains of 1.5%, 0.5% and a bruising 15.1% in the case of potato. Nor is the outlook for vegetable inflation particularly reassuring with June’s retail price trends as well as the lag from escalating wholesale costs pointing to more pain ahead for consumers running their household budgets. Data from the Department of Consumer Affairs Price Monitoring Division show the all-India average retail price of tomato, onion and potato, as on June 14, were 21%, 14% and 8% higher, respectively, month-on-month, and a significantly steeper 35%, 58% and 44% costlier, respectively, when compared with their year-earlier prices. At the wholesale level, sequential inflation in tomato, onion and potato was disconcertingly faster at 28%, 18% and 9%, respectively, underlining the challenges policymakers face in containing prices through trade measures.

Food inflation also manifested last month with a quickening in price gains in the category’s largest constituent — cereals and products — to a five-month high of 8.69%. Retail cereal prices from the price monitoring division’s daily dashboard show rice was 13% costlier than on June 14, 2023, wheat was 5.7% more expensive and inflation in wheat flour (atta) was 4.7%, signalling that here again the prospects of a let-up in price pressures are remote, at least for now. Pulses saw inflation quicken again, after a mild slowing in April to 17.1% with the pace of sequential price rise hitting a six-month high of 1.53%. Official price data for June 14 showed gram dal, tur, urad and moong costlier by 17%, 27%, 13% and 8.5% than a year earlier, respectively. Rainfall data from the India Meteorological Department as on June 14 that show a 12% deficit since June 1 is also a cause for mild concern, an ‘above normal’ monsoon forecast notwithstanding. With food inflation particularly hitting hardest the poorer sections, policymakers can ill afford to drop their guard.

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