Prices of food items soar again

Cooking a daily meal has got expensive as prices of onion, tomato, pulses and mustard oil seeing a spike. Government data show prices of basic cooking items have registered a2.7-37 per cent rise in a month’s time.

A combination of factors such as surge in diesel prices and higher temperature affecting crops is likely to have pushed up inflation. The government will release retail inflation data for February on March 12. What is interesting is that the rate of retail inflation for January was 4.06 per cent while food inflation was at 1.89 per cent, mainly on account of lower vegetable prices.

Consumer affairs data

Data sourced from Department of Consumer Affairs showed that the maximum retail price of gram (chana) dal was ₹94 on February 1 and surged to ₹129 on March 1. Even minimum retail prices went up to ₹59 a kg from ₹55 during the period under consideration. Onion registered an increase of over 21 per cent, while prices of tomato saw a growth of over 11 per cent. Prices of edible oils also jumped.

However, onion prices, which increased during the third week to ₹4,000 a quintal, have slipped over 30 per cent to around ₹2,650 currently. Edible oils have begun to ease since last week with prices dropping about 1.5 per cent in the global market.

Global factors

Anil Kumar Sood, professor and co-founder of the Institute for Advanced Studies in Complex Choices (IASCC) said that there has been an across the board increase in commodity prices globally – which is partly resulting from dollar depreciation and is partly driven by expected increase in demand. For example, vegetable oil prices have increased by nearly 35 per cent since Q3 of 2020, with increase during January 2021 itself being in excess of 10 per cent.

“Consequently, the reduction in imports duty by India, effected during November 2020, has had no real impact on lowering domestic prices. In addition, international freight rates have increased significantly during the last few months, resulting in even bigger increase in landed costs,” he said

Further he said that after fall in January, there is possibility of heading back towards the earlier inflationary trend in vegetable prices.

Rising fuel price

Since the petroleum prices have been going up during the last few months and the government has also been taxing petrol and diesel at an increasing rate. “We can expect a cost-push inflation – particularly in products or commodities wherever the producers or intermediaries are able to pass on these increases to consumers,” he said.

As truck freight has seen double digit increase Sood, using industry estimates, expects vegetable prices could go up as much as ₹1 per kg.

Aditi Nayar, Principal Economist with ICRA has already projected that inflation is expected to resume an uptrend in February-March 2021. Earlier, Sreejith Balasubramanian, Economist with IDFC AMC had said that, going forward, the base effect which helped recent lower prints, will wane in February and March and the magnitude of disinflation in vegetables would also most likely ease, while the price movement in pulses and vegetable oils needs to be watched closely.

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