India’s retail inflation for July hits 7.44% from 4.87% earlier in June with 11.5% spike in the food prices.
Riding on tomatoes, vegetable prices soared 37.3% while cereals and pulses became over 13% costlier. The surge lifted the food bill of urban consumers by over 12.3%, while rural consumers encountered 11% food inflation.
However, the month of August brought some relief for the consumers as the vegetable prices fall for the first time in two months.
After riding on top, the prices for vegetables witnessed a drop by 3.6% in the month of August.
This was the first time in two months that weekly veg prices have declined and may be a sign that the recent price spike may be abating, although the new harvest is at risk from a (so-far) deficient monsoon.
In an interaction with ETBFSI, Madhavi Arora, Lead Economist at Emkay Global said the price pressures are being well managed by the policy makers.
“We are seeing a week-on-week basis correction in threshold prices led by the tomatoes. The policy intervention in terms of export curbs or increase import dependence indicates that there could be a sharp mean revision in perishable food that would lead to control over inflation.”
How is monsoon rain deficit?
August has not been a pleasant one for the monsoon rains as the monsoon deficit worsens with driest August in over 100 years, data from Emkay Global suggested.
As of August 18, as per the IMD data, cumulative rainfall was 6% below the long-term average (LTA), while weekly rainfall was 53% lower than the LTA.
August rainfall is currently ~40% below normal, making this the driest August in over 100 years, which has put the kharif harvest at risk
Spatial divergence continues, but the position has worsened, with only North & West India (8% above LTA) seeing surplus rains, while East & North East (-20%), Central (-3%) and South India (-8%) are deficient.
Risks to cereal inflation
As of August 18, the total area under sowing (102.3mn ha) was 0.1% higher than last year.
Rice sowing stayed higher than last year by 4.3% at 36.1mn ha, as did coarse cereals (17.6mn ha; 1.4%), while oilseeds sowing was lower (18.6mn ha, -1.7%). Pulses (11.5mn ha; -9.2%) sowing worsened compared to last year.
Another key crop, cotton sowing (12.1mn ha; -1.9%) is also below last year’s level, while sugarcane (5.6mn ha; 1.3%) sowing stayed higher.
“For cereals, monsoon deficit will cause an issue not only on the rice production but also on the wheat production, and that would be a structural risk that needs to be watched out,” Madhavi Arora said.
She asserted that the government has been proactive in terms of supply management.
The problem of cereal recession is not there from the recent weeks but since a long time due to the global mayhem (Russia-Ukraine crisis).
They (Government) are doing their bit in terms of curtailing the exports of domestic produce, she said.
“For rice, the buffer norms are not as robust as for wheat, but the government is anyhow keeping an eye on how much they need to keep in buffer, and what other interventions they need to take,” she highlighted.
Reservoir levels in deficit
The Reservoir levels are in deficit, and below last year. Overall basin-wise reservoir levels moved into deficit for the first time this season, and are also sharply below last year’s level. As of Aug 17, the overall level is ~1% below the LTA, and 18% below last year’s level.
Of the major river basins, the Godavari (west and south), Indus (north) and Narmada (central and west) are in surplus, while the Ganga (north and east), Cauvery (south), Mahanadi (central and east) and Krishna (west and south) basins are in deficit.
