Increased Retail Inflation threatens soaring Vegetable Prices

 

The vegetable crop is expected to be available in the market till August typically resulting in a price drop. However, traders believe that this year's shortages will keep costs high until October.

Due to disruptions brought on by erratic monsoons in India, which cause delayed planting & damage to crops throughout their ripening stage, farmers and traders in India estimate that vegetable prices would stay high for a prolonged length of time.

According to official statistics from Reuters, vegetable prices, which make up 6% of the entire Consumer Price Index, rose by 12% from May to June, reaching a seven-month high.

In addition to making voters unhappy ahead of future state elections, the rising costs of necessities like onions, beans, carrots, ginger, chillies, and tomatoes are also anticipated to increase retail inflation. In fact, because of these more expensive necessities, retail inflation is predicted to reach a seven-month high in July. The RBI's ability to reduce interest rates this year is expected to be constrained by this spike in inflation.

According to Reuters, farmers in Karnataka, the third-largest tomato-producing region in India, blame unfavourable elements like insufficient rainfall, high temperatures, and a virus epidemic that harmed the crop for the price increase. The cost of tomatoes has increased dramatically, setting a new record high of ₹140/kgs. Furthermore, due to a sharp decline in pricing during that time, tomato cultivation decreased from the previous year.

Various crops have been affected by the monsoon in different parts of India. Rainfall in certain states in the north and west, which are important vegetable-producing areas, reached up to 90% over average. However, certain states in the east and south experienced up to 47% less rainfall, which resulted in drier conditions.

IMD also points out that certain states experienced protracted dry spells before being pounded by tremendous rainfall that was equal to a month's worth in a single week. As per reports, the interruptions in the supply chain and the resulting rise in food prices are predicted to push retail inflation to 6.5% in July, which is higher than RBI’s target range of 2-6%.

- Adarsh Agarwal