Food inflation climbs up at 9.36% in June

High prices for tomatoes, potatoes, and onions in several cities have been driven by supply disruptions following extreme heat and subsequent heavy rainfall. Vegetable inflation escalated to 29.32% in June from 27.33% in May, with onion and potato prices soaring by 58.49% and 57.59% respectively.

 Compared to June 2023, when food inflation was 4.55% y-o-y, the current figures represent a significant rise.

Last month, prices for essential kitchen staples like tomatoes, onions, and potatoes surged by double digits. This spike was attributed to extreme heat and heavy floods in northern Indian states, which severely disrupted agricultural production.

Vegetable inflation escalated to 29.32% in June from 27.33% in May, with onion and potato prices soaring by 58.49% and 57.59% respectively due to lower production prospects. The agriculture ministry projects potato and onion output in the 2023-24 crop year at 56.76 million tonnes (MT) and 21.23 MT, reflecting a decrease of 6% and 20% respectively.

As of July 12, the average retail price of tomatoes across India was Rs 65.21/kg, up from Rs 53.36/kg the previous year. Despite this increase, the government currently has no intention to reintroduce subsidized tomato sales, a measure previously implemented when prices exceeded Rs 110 per kg.

Inflation in pulses and products was at 16.07% in June, slightly down from 17.14% in May. Among pulses, the arhar variety saw the highest price rise at 26.86%. Gram split and moong prices rose by 18.49% and 8.44% respectively.

Cereal inflation increased marginally to 8.75% in June from 8.69% in May, driven by higher prices of rice and wheat. Wheat prices rose by 6.67% in June, up from 6.53% in May, while retail rice prices increased by 12.15%, slightly lower than in May.

To boost domestic supplies, the government has banned white rice exports and imposed a 20% export duty on par-boiled rice. Additionally, over one MT of rice has been sold at a subsidized rate of Rs 29/kg under the Bharat rice initiative.

Inflation in meat and fish dropped to 5.39% in June from 7.28% in May, while chicken prices rose by 5.11%. Mustard and refined oil prices decreased by 8.59% and 6.39% respectively, contributing to a 2.68% decline in the oils and fats category. Inflation in spices eased to 2.06% in June from 4.27% in May, with jeera prices declining by 3.79% y-o-y.

Aditi Nayar, chief economist at ICRA, noted the rebound in food and beverages inflation to over 8.0%, mainly due to the sharp rise in vegetable prices.

According to a Reuters poll of 54 economists conducted from July 5-9, consumer price inflation is expected to have increased to 4.80% year-on-year in the latest month, up slightly from 4.75% in May. Food, which constitutes about half of the overall CPI basket, played a significant role in this trend. 

Meanwhile, wholesale price index-based inflation is projected to have surged to 3.50% annually in the same period, rising notably from 2.61% in May.