Vegetables in India becoming costlier as Pakistan already witnesses record-high food inflation
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Vegetables in India becoming costlier as Pakistan already witnesses record-high food inflation
KOLAR/LAHORE (Reuters/Web Desk) – Vegetable prices in India are set to stay higher for longer, as erratic monsoon rains delayed planting and damaged ripening crops, Reuters quoted farmers and traders as saying.
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Vegetables prices, which have a 6 per cent weighting in the overall consumer price index (CPI), hit a seven-month high in June, rising 12pc month-on-month, official data shows.
The report comes as Pakistan too is witnessing an alarmingly high food inflation with a steep rise in prices with vegetables’ prices proving to be major contributor mainly because of expensive inputs, counterfeit pesticides, reduction in under cultivation area and transportation cost due to the high petroleum prices.
Putting the economic factors aside, the change in weather pattern reflected in higher temperatures and increase in rain intensity are a factor behind in higher vegetable prices in Pakistan too.
This trend became more visible when the devastating floods hit the country last monsoon season, not only destroying the standing crops but also resulting in delayed cultivation next season. In some areas, there was no cultivation at all because draining the accumulated water took too much time, thus disrupting the entire supply chain.
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Coming back to India, prices usually ease from August, when the harvest makes its way to the market, but this year, traders expect costs to remain high until October as supplies stay tight.
"The monsoon is disrupting the vegetable supply chain. This year, we are going to witness higher vegetable prices for a prolonged period," said Anil Patil, a Mumbai-based trader.
Costlier staples such as onions, beans, carrots, ginger, chillies and tomatoes not only feed voter discontent ahead of state elections in the next few months: The higher prices are likely to stoke retail inflation, which is expected to hit a seven-month high in July, diminishing the potential for the Reserve Bank of India (RBI) to lower rates this year.
"Supply-side measures would be best suited to temper the rise in food prices. The RBI is expected to remain on pause till at least December 2023," said Gaura Sen Gupta, India economist at IDFC FIRST Bank.
Tomato prices are particularly hot, surging more than 1,400pc at the wholesale market to a record 140 rupees ($1.71) per kg in the past three months, prompting many households and restaurants to cut purchases.
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Farmers in the third-biggest tomato-producing region in the southern state of Karnataka say poor rainfall, higher temperatures and a virus outbreak have hit the crop, which was planted on less land than a year ago because of a crash in prices.
"Supplies are just 30pc of normal as yields," said farmer Srinath Gowda, who manages 200 acres of farmland.
The monsoon has also affected other crops. Key vegetable-producing northern and western states received as much as 90pc above-average rainfall, and some eastern and southern states got up to 47pc less rain, according to the weather department.
Some states received no rain for weeks, and then were flooded with a month's worth of rain in a week, an official with the meteorological department said.
The supply disruptions, and the resulting higher food prices, are expected to send retail inflation higher to 6.5pc in July, its highest level this year and above the Reserve Bank of India's 2pc to 6pc target range, HSBC economists said in a recent note. Economists now expect the RBI to keep interest rates high into mid-2024.
Supplies should start picking up in the next few weeks from crops planted in June, but that will not be sufficient to cool prices, said Rajendra Suryawanshi, a vegetable trader in the western city of Pune.
"Meaningful correction in prices would begin from September, and in October, we could see prices falling to a normal level," Suryawanshi said.
