Uneven rainfall to further drive food inflation. Prices of perishables will put more pressure on the pocket than cereals
The pockets of people haven’t recovered from prices of staple vegetables that touched the sky, driven by heatwaves and delayed monsoon in June. Uneven rainfall in July and early August might send shock waves to consumers as food inflation is likely to surge.
"Food Inflation is the main factor behind the grudgingly slow pace of disinflation. Recurring and overlapping supply-side shocks continue to play an outsized role in food inflation," said RBI Governor Shaktikanta Das in the last interest rate meeting.
As per the Ministry of Statistics and Programme Implementation data, food inflation was 9.36 per cent high year-on-year in June 2024. Due to the extreme changes in the weather pattern, especially heatwave, the prices of vegetables soared 29.32 per cent.
“Going forward, even though a high base last year is going to pull headline inflation down towards 4 per cent in the third quarter. There are upside risks to food inflation due to an uneven monsoon even as sowing of key summer crops are tracking better than last year,” a Goldman Sachs report read.
Why Your Grocery Bill is Soaring?
Climate change seems to be the major reason for the skyrocketing vegetable prices. The harsh heatwaves in April and May, combined with weak and uneven monsoons in June and July have hurt crop yields. The shortage of produce has pushed food prices even higher.
While monsoons have arrived in most of the states, the uneven nature of rainfall has disrupted the supply chain challenging transportation, labour shortage, and logistics.
As a result, vegetable prices have surged with costs for staples like tomatoes, onions and potatoes jumping into double digits. To make things worse, the shortage of warehouses and poor storage facilities have only driven prices higher.
Prices of major vegetables are refusing to show any downward trend. For instance, the price of potatoes increased from Rs 34.65 kg in July to Rs 37.08 kg by early August. This represents a roughly 53 per cent rise compared to the same time last year.
The price of onions has increased from Rs 42.46 kg to Rs 43.37 kg, marking a surge of nearly 58 per cent as compared to the corresponding month of last year.
Meanwhile, the cost of tomatoes has also surged from Rs 55.04 kg last month to Rs 58.34 kg. However, compared to August 2023, when tomatoes were priced at Rs 140.10 kg, there’s been a significant decrease of around 59 per cent.
Kotak Institutional Equities, in a report released in June, stated that inflation has panned out broadly in line with expectations. "However, we remain wary of the last mile disinflation pace as risks persist from geopolitics impacting commodity prices, subsequent price transmission to finished goods and adverse weather impact," the report read.