The most recent retail inflation data demonstrates once more how unstable food prices keep wider inflation as well as the engine of economic growth—personal consumption—hostage. Although the Consumer Price Index (CPI)-based headline reading for February was 5.09%, essentially unchanged from the previous month, the Consumer Food Price Index-based measure of food price increases increased by 36 basis points to 8.66%. With the third-heaviest food category in the food and drinks sub group of the CPI recording 30.3% year-over-year inflation, a startling 315 basis points increase from January’s reading, vegetable prices remained to be the major source of worry. Additionally, the percentage of cereals, which make up the greatest weight of foods in the CPI, remained high at 7.6%, only slightly slower than the 7.83% rate from the previous month. The vegetable trinity of potatoes, onions, and tomatoes led the way. It is the most eaten group in the country and accounts for more than a third of the category’s weight. Prices for potatoes increased from a year-over-year decline of almost 2% in January to a 12.4% increase, onions saw a 22.1% increase, and tomato price growth slowed by over 400 basis points to a six-month high of 42%. There isn’t much improvement on this front, as seen by the Department of Consumer Affairs’ daily price monitoring dashboard, where the average retail prices of potatoes, onions, and tomatoes are still 21.3%, 41.4%, and 35.2% higher, respectively, as of March 14 compared to the same day last year.
It is evident that the government’s supply-side policies, such as the export restriction on onions that has been in place for three months, have not done anything to lower the cost of these politically sensitive food ingredients. Furthermore, the prognosis is also not encouraging. According to the Ministry of Agriculture and Farmers Welfare’s First Advance Estimates, which were made public on March 7, potato production is expected to decline by about 2% and onion output is expected to be more than 15.6% lower in the 2023–24 horticultural crop year than it was the previous year. Summer-sown crops are not expected to fare well either, according to statistics on water storage from the Central Water Commission, which shows live storage at 150 reservoirs nationwide as of March 14 at 40% of capacity, lagging both the 10-year average and the year-earlier levels. This is especially true in the southern area, where there is a 29% acute storage deficit as compared to the 10-year normal. “Private consumption, which accounts for 57% of GDP, is languishing under the strain of still elevated food inflation,” Reserve Bank of India Deputy Governor Michael Patra noted in his statement to the Monetary Policy Committee last month, perfectly summarising the risks to the economy from persistently high food inflation. In rural places, this is especially significant. In order to ensure equitable and sustainable growth, inflation must be controlled to its aim. With the nation gearing up for elections, policymakers have their work cut out if they want to prevent a summer of dissatisfaction in the economy.
Abhishek Verma
Editor, Canon Times
Author: This news is edited by: Abhishek Verma, (Editor, CANON TIMES)
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