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FOOD INFLATION IN INDIA



  Jun 26, 2024

FOOD INFLATION IN INDIA



Food inflation in India has been consistently high, driven primarily by supply-side factors, despite early monsoon rains and forecasts of above-normal rainfall. Here are the main reasons for this persistent issue:

SUPPLY-SIDE FACTORS

1. Adverse Weather Conditions: A drought last year and an ongoing heat wave have significantly reduced supplies of key foods like pulses, vegetables, and cereals.
2. High Temperatures: Soaring temperatures, 4-9 degrees Celsius above normal in half of the country, spoil harvested and stored vegetables and hinder the planting of crops such as onions, tomatoes, eggplant, and spinach.

MONSOON IMPACT

1. Early but Inadequate Rainfall: Although the monsoon arrived early, it soon lost momentum, resulting in an 18% rainfall deficit, delaying the planting of summer-sown crops.
2. Patchy Rains: Despite forecasts of above-average rainfall for the rest of the season, initial rains have been insufficient to fully support agricultural activities.

PRICE OUTLOOK

1. Vegetable Prices: Expected to fall from August if the monsoon revives and covers the entire country as per the usual schedule. However, potential floods or prolonged dry spells could disrupt the production cycle.
2. Milk, Cereals, and Pulses: Prices are unlikely to decrease soon due to tight supplies. The government’s lack of plans to import wheat will allow its prices to rise further. Rice prices may also increase due to a 5.4% rise in the minimum support price.
3. Sugar: Prices are likely to remain high due to expected lower production next season.

GOVERNMENT INTERVENTION

1. Export Restrictions and Import Easing: The government has restricted exports of sugar, rice, onions, and wheat to bring down prices, but these measures have been unpopular among farmers and led to electoral losses for the ruling party in rural areas.
2. Potential Price Allowances: To win back farmers’ support before state elections, the government may allow prices of some crops to rise instead of taking aggressive measures.

Food prices in India are expected to remain high due to a combination of adverse weather conditions, supply shortages, and cautious government intervention policies.


SRIRAM’s


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