Why your kitchen staples have taken a hit
- The production prospects of vegetables and pulses were particularly impacted by unfavourable weather conditions, the document said.
- The increase in tomato prices in July 2023 was caused by seasonal changes in crop production, region-specific crop diseases such as white fly infestation, and the early arrival of monsoon rains in the northern part of the country, the document said.
- The spike in onion prices was due to several factors, including rainfall during the last harvesting season affecting the quality of rabi onions, delays in sowing during the kharif season, prolonged dry spells impacting kharif production, and trade-related measures taken by other countries.
- The prices of pulses, particularly of tur, increased due to low production over the past two years, caused by adverse weather conditions.
- Urad production was affected by slow sowing progress in the rabi season coupled with climatic disturbances in the southern states.
- The area and output of gram was also lower compared to the previous rabi season.
- Since the beginning of 2023, there has been an increase in the price of milk. This is due to a decrease in artificial inseminations during the peak days of the pandemic, as well as higher costs for animal feed. The milk cooperatives increased the price of milk and milk products to account for increased costs. The milk price increase moderated by the end of FY24.
What made the sugar prices sweeter for common man?
The export restrictions announced by the centre in June 2022 have played a role in stabilising domestic sugar prices, said the survey.“As a result, even though the global sugar price index inflated and has been showing volatility since February 2023, domestic sugar prices have remained much less volatile.”
The Reserve Bank of India has consistently expressed concerns over rising food prices.
Food inflation in India has remained at around 8 per cent year-on-year since November 2023 and is unlikely to ease any time soon, despite early arrival of monsoon rains and forecasts of above-normal rainfall.
Elevated prices of food, which accounts for nearly half of the overall consumer price basket, has kept headline inflation above the central bank’s target of 4 per cent, preventing it from cutting interest rates.Recently, India’s retail inflation saw an uptick for the first time in five months as it accelerated to 5.08 per cent on an annual basis in June driven by an increase in food prices.
Food inflation which accounts for around half the overall CPI basket, increased to 9.55 per cent in June from 8.69 per cent in May and 4.55 per cent in June 2023.
The last mile challenge:
Even as the central bank tries to bring down India’s retail inflation to its 4 per cent target, the last mile of the disinflationary process is proving to be sticky owing to the ‘stubborn’ food prices in the country, Reserve Bank of India Governor Shaktikanta Das said last month.
“The narrative about inflation is coalescing around the view that while the disinflation was achieved in about a year as in earlier inflation episodes, the ‘last mile’ in the descent to the target may pose the biggest challenge,” the central bank said.
Elephant in the woods:
During the June Monetary Policy Committee (MPC) meeting, Das likened inflation to an elephant returning to the woods very slowly, underscoring the central bank’s cautious approach.
The RBI left the inflation aim for fiscal 2025 unchanged at 4.5 per cent. Inflation for fiscal 2024 stood at 5.4 per cent, at par with the central bank’s forecast.
The central bank now sees inflation for Q1, Q2, Q3 and Q4 of this fiscal year at 4.9 per cent, 3.8 per cent, 4.6 per cent and 4.5 per cent, respectively, with risks evenly balanced.
Since February 2023, the RBI has incrementally raised its policy rate to 6.5 per cent, followed by a prolonged pause, aiming to stabilize inflationary pressures.
Despite the overall positive trajectory, inflation remains a key concern for the Indian economy as the uptick in June 2024 has derailed its disinflation path, the Reserve Bank of India (RBI) said last week in its monthly bulletin.
In January 2023 (FY23), the retail inflation had surged dramatically to 6.52 per cent after dipping for two months. Apart from an unfavourable base, the burning prices of food (which accounts for almost 40 per cent of the Consumer Price Index) fueled the inflation level.
However, throughout the fiscal (FY24), the inflation rate witnessed moderation and reached within the RBI comfort zone, especially in H2. Since then, inflation has remained within the tolerance levels.
Content Source: economictimes.indiatimes.com