Severe rains and hailstorms in Maharashtra, Gujarat, west Madhya Pradesh and parts of Rajasthan in recent times could push inflation to around 6% over the next three months with rising pulses and onions prices keeping food inflation high, experts said.
“Food inflation will continue to be under pressure, and I believe that 6% inflation can prevail over the next three months,” said Madan Sabnavis, chief economist at Bank of Baroda. “Rabi sowing is lagging and low reservoir levels can impact final crop outcomes,” he said.
Inflation had declined to 4.9% in October, according to data released last month, but food inflation remained unchanged at 6.6%.
The pressure on food prices is expected to intensify after the central part of the country – the core agricultural zone – saw a 682% increase in rainfall over the long period average (LPA) during November 23 to November 29, according to the India Meteorological Department (IMD).
The unseasonal hailstorm and rains caused large-scale damage to a large portion of tur crop and onion crop, agriculture experts said.
Tur had already seen a sharp fall in acreage in the kharif season, at 43.87 lakh hectares as on September 29, 2023, down from 46.13 lakh hectares on September 29, 2022, according to the government’s data.
Onions and pulses together have a 3% weight in the retail inflation basket.
Pulses inflation had risen to 18.8% in October, with tur prices rising 40.9% compared with the previous year. The rate of inflation in tur was higher than 37.3% in September. The government’s efforts to increase imports by scrapping the import duty made little impact.
Experts say pulses inflation may rise further as tur price rise has not ebbed.
“In November, tur dal retail prices are tracking higher by 37.7% year on year, which will add around 0.3 percentage points to headline CPI (Consumer Price Index),” said Gaura Sengupta, economist at IDFC First Bank. “Overall, pulses prices on a CPI-weighted basis are tracking higher by 22% year on year in November,” she said.
Tur has a 0.8% weight in the retail basket.
Onions could add another 0.5 percentage points to headline inflation in November, trading 79% higher than a year ago, experts said.
There has been damage to the onion crop in places such as Nashik and Ahmednagar due to the recent hailstorms in Maharashtra, said Tanmay Deepak, analyst at Agriwatch, an agriculture research firm that works with a million farmers.
“The arrivals (of onions to mandis), which should have peaked at this time of the year, have declined. This is pushing the prices up,” he said.
The delay in kharif onion sowing due to unfavourable weather has resulted in less coverage and the late arrival of the onion crop. With stored rabi onions (harvested in April-May) getting exhausted and delay in the arrival of kharif onion, there is a tight supply situation, resulting in the price increase, Deepak said.
The all-India retail price of the kitchen staple increased 94.39% to Rs 57.85 a kilogram as on November 29 from Rs 29.76 per kg a year ago, according to government data.
The impact could spill over to the rest of the year if rabi sowing does not pick up, experts said.
“The impact of vegetable prices will be transient as there are multiple cropping seasons,” Sengupta of IDFC First Bank said. “Pulses price pressures could be more persistent.