The continued slide of the new series of the consumer price index to its new historic low of 1.54 per cent in June was mostly driven by benign food prices, principally tomatoes, potato and pulses, all of which fell between 20 per cent and 40 per cent compared to the same period last year.

However, indications are that the slide driven by food prices will end in July.

There are two reason for this. One, prices of items such as tomatoes have been climbing sharply in July and may remain somewhat elevated during the monsoon months though not necessarily at the prevailing rates.

Disaggregated data of the CPI show the price index for tomatoes declined a sharp 31.6 per cent in May and 40.8 per cent in June.

However, retail prices of tomatoes started rising in late June and the average all-India price of the vegetable in July is already 14 per cent higher, at ₹46 a kg, compared with its average retail price in July 2016 of a little over ₹40, according to Consumer Affairs Ministry data.

Prices usually vary from State to State and city to city. In Delhi, for instance, tomato prices are 25 per cent higher, at ₹70/kg, than what they were in July 2016.

Two, the base effect seen in the inflation of pulses will begin to wear off after July. Prices of pulses such as arhar (pigeon pea), urad (black lentil), moong (green gram) and masoor (red lentil) began easing about a year ago after the government began intervening in the market with various measures such as action against hoarders and imports in June and July. Between August and December last year, the prices of pulses eased significantly and have remained benign ever since. At the all-India level, the prices of arhar dal averaged ₹139/kg in July 2016, urad dal ₹152/kg, moong dal ₹97/kg and masoor dal ₹86/kg, according to Consumer Affairs Ministry data.

These prices are currently down to an all-India average of ₹80, ₹92, ₹78 and ₹72, respectively, and may not fall much below these levels.

The CPI in the recent months was also helped by the lower prices of staples such as onions over the past many months — average all-India retail price of the bulb is about 10 per cent lower than it was a year ago at about ₹15/kg.

Prices of onions are usually volatile although they have stayed surprisingly stable for long, save for a short spike during monsoon. Yet, there is no saying which way the prices will move in the next few months as rains shower down.

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