Onion prices are already high, and there's more bad news
NEW DELHI : Onion prices, which are sharply higher this year, are likely to stay elevated, with scanty rains hurting production of the kitchen staple. Onion output in the 2023-24 crop year may fall 15.6% to 25.4 million tonnes (mt) as key growing regions received weak rains, the agriculture ministry said. Production is expected to be lower by 3.4 mt in Maharashtra, 995,000 tonnes in Karnataka, 354,000 tonnes in Andhra Pradesh and 312,000 tonnes in Rajasthan.
Erratic rains sparked two vegetable price shocks in July-August and November 2023, leading to flare-ups in tomato and onion prices, respectively. In November, retail prices of onion rose to as high as ₹80 a kg, prompting the government to ban its exports, and deploy cooperative bodies to sell it at subsidized prices. “Prices will remain firm as the ministry has reported a fall in output by 5 million tonnes this year.
Inflation will remain elevated due to higher prices resulting from lower output this year," said Madan Sabnavis, chief economist of Bank of Baroda. On Thursday, the all-India average onion price in the retail market was ₹33.3 a kg, up 28.6% on-year, data from the consumer affairs ministry showed. Lower output this year could lift prices further and put upward pressure on inflation, farm experts said.
In January, food inflation, which accounts for nearly half the overall consumer price basket, stood at 8.3%, down from 9.53% in December 2023. Inflation in onion stood at 29.4% in January, against 74% a year earlier. “Unpredictable weather shocks remain the biggest risk to the inflation outlook, though government intervention, as in the past, to increase food supplies in the market could partially cushion the adverse impact," rating agency Crisil said in its
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