Rising prices of pulses more worrying than vegetable price hike: Crisil Chief Economist

T V Jayan New Delhi | Updated on December 13, 2019

Many pulses and vegetables crops have suffered substantial damage during heavy monsoon rains   -  philipimage

The rising trend in prices of vegetables and pulses, which has pushed the consumer food price inflation into double digits after a gap of six years, may remain that way for a while as the full extent of the crop damage caused by the excess and unseasonal rains during the monsoon, is yet to be ascertained.

Retail food inflation is expected to remain above the normal range in the coming months till the rabi harvest, the prospects for which are said to be better because of better soil moisture levels and the excellent water storage situation.

Food and beverage inflation rose to 8.66 per cent in November as compared to 6.93 per cent in the previous month, due mainly to inflation in prices of vegetables (36 per cent y-o-y) and pulses (14 per cent y-o-y). 

The substantial damage suffered by many pulses crops and vegetables, such as onion, due to the heavy monsoon rains would do to ease the prices of these commodities in the coming months. Many pulses and soyabean growing areas in Madhya Pradesh and Maharashtra remain inundated, resulting in severe crop damage.

But, according to Dharmakirti Joshi, Chief Economist at rating agency Crisil, what is more worrying is the increase in pulses prices, which normally follows a cycle of two to three years. What is seen on the vegetable front is rather transient, he said, adding that vegetables have been seen two-three such episodes year after year. This would pass soon, Joshi said.

According to him, the global food price index, which was also creeping up slowly, should be closely monitored. On the non-food front, the factors that can push up inflation are increasing telecom tariffs, as well as potential changes in GST rates. "We are hearing noises about GST rates being increased. It is speculation right now, but if that happens, it could contribute to an inflationary trend," he said.

On onions, Joshi said, the prices would eventually come down once imported onions become available widely.

While participating in a Parliamentary debate on crop loss during the 2019 kharif season, Agriculture Minister Narendra Singh Tomar said on Thursday that the heavy rains had impacted around 64 lakh hectares of agricultural land in the country. He said nearly a quarter of the kharif onion crop has been damaged, with many onion-growing areas going under water. As against an expected kharif onion harvest 70 lakh tonnes in November, the production may slide to 53-54 lakh tonnes, he informed the Lok Sabha.

According to SBI Ecowrap, rising prices of onions have become a matter of a national importance. The average mandi price of onions during November was 223 per cent that in May, due to a 26 per cent drop in the kharif and late-kharif crop on account of excess rains in Maharashtra and Karnataka, which reported extensive crop damage.

The report prepared by the SBI’s Group Chief Economic Adviser, Soumya Kanti Ghosh, does not expect onion supply to be normalise before January 2020. India’s annual onion requirement is said to be around 150 lakh tonnes.

Meanwhile, government officials and experts said that the December rains received across the central and north Indian regions on Thursday would be beneficial for the rabi crop. “We expect this to benefit the wheat crop, as the farmers were about to irrigate their fields when the rains were received,” said Suresh Gahlawat, Additional Director (Agriculture Extension) at the Haryana agricultural department.

Rekha Mishra, who heads the market research division of private weather forecaster, Skymet Weather, said Thursday’s mild to moderate rains was ideal for the rabi crop, barring a small patch between Shajahanpur and Dewas in Madhya Pradesh, which faced some hailstorm.



Published on December 13, 2019

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