Pulses flare up every third year, says Crisil study bl-premium-article-image

Our Bureau Updated - January 22, 2018 at 05:00 PM.

This year has seen the sharpest spike aided by supply side shocks

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There is a clear pattern of a spike in pulses inflation every third year, though this year the peak is higher than the last two peaks, with wholesale price index (WPI)-based inflation already crossing 34 per cent average so far, says a report by CRISIL Research.

Deficient monsoon

It said this year’s spike can be explained by supply side shocks, mainly from deficient monsoon and higher global prices, while various other factors – such as drought and delayed rains, high growth, shift toward protein consumption and demand pushed up by higher rural wages due to NREGA – can explain the previous spikes.

Overall, what has impacted pulses production most are three consecutive monsoon shocks – deficient South-West monsoon in 2014 and 2015 affecting the kharif season output and weather disturbances in March 2015 affecting Rabi output.

Four States – Madhya Pradesh, Maharashtra, Rajasthan and Uttar Pradesh – produce about 70 per cent of the country’s pulses output. Except in Rajasthan, the other States have seen acute rainfall deficiency in four out of the last eight years, hitting production.

Food inflation

The report noted that while food prices were the biggest contributor to the decline in the consumer price inflation (CPI), pulses inflation had seen the sharpest spike in a decade. The CPI and WPI inflation for pulses was 42.2 per cent and 53 per cent, respectively, in October.

Historically (1983-84 to 2014-15), WPI pulse-inflation rate in India has averaged 8.9 per cent, which is higher than the overall WPI inflation of 6.7 per cent average. But in the last decade (2004-05 to 2014-15) while overall WPI inflation rate fell to 6.3 per cent, pulses inflation has been much higher at 9.4 per cent average.

“Such high inflation rate in pulses is undesirable for a country where pulses are second most important part of diet after cereals and an average Indian spends nearly 5 per cent of his food expenditure on pulses,” says the report.

Concerned at low acreage of pulses amid rising demand, the report said at a time when global pulse prices are elevated and the rupee is weak, resorting to imports could provide limited comfort to domestic prices.

Noting that uncertainty about getting stable returns could have led to large-scale substitution of area under pulses cultivation to other high-value crops, the report noted that since pulses was a significant component of the consumption basket, any rise in its prices can have a huge impact on inflation expectations and can influence wage-price negotiations.

This is especially critical given that the Reserve Bank of India’s inflation target is set at around 4 per cent in the medium-term.

Published on November 16, 2015 15:56