Indians want more vegetables, this continues pushing inflation higher
Reserve Bank of India and government officials may brush aside the seasonal bumps in vegetable prices terming it 'transient'. Yet, structural issues mean that the instances of such spikes have only increased in recent times, forcing the policymakers to focus on the short-term, analysts said on Monday.
Higher incomes have meant that Indians now prefer higher consumption of non-cereal products like meat, pulses, fruits and vegetables.
Demand in India for vegetables has been far outpacing the supply, data shows.
Seasonal spike in vegetable prices have become commonplace in recent years owing to a high volatility in production and prices supply-demand mismatches, research firm CRISIL said in a report. The most volatile component, vegetables form a 15.5 per cent weight in the food index, which is the highest after cereals and milk.
Every year, food inflation comes back to 'haunt' the Indian economy as the prices of oft-used vegetables like onions and tomatoes surge due to weather imbalances.
Monsoon in 2023 was delayed in June followed by excess rain in July, a deficit in August and excess yet again September.
These imbalances sent the prices of tomatoes and onions through the top, triggering a rise in headline inflation and a pain point for Indian households for whom these vegetables are staple.
Volatility has only increased
As per analysts at CRISIL, while vegetables inflation averaged 0 per cent during FY16-19, the number rose to 5.7 per cent between FY20-23.
Furthermore, the frequency of spikes in vegetables' prices has also increased. «In the past 100 months, CPI vegetable inflation was above its period average of 3.8 per cent in 49 months.
