Weather, demand-supply mismatches TOPpling inflation mathematics: Crisil
Volatility in vegetable prices has increased in the last four years not just because of weather-related events but demand-supply mismatches, causing a problem for consumers, farmers and policymakers, according to a Crisil report released Monday.
“The inflation volatility is bad for consumers and farmers and distracts policymakers in the short term, forcing frequent and repeated price smoothening measures,” Crisil said.
Vegetables have a 6% share in the overall inflation basket and account for 15.5% weight in the food category.
“In the past 100 months, CPI vegetable inflation was above its period average of 3.8% in 49 months. It was above 7% in 35 months, above 10% in 30 months and above 20% in 13 months,” Crisil economists noted in their report, pointing to higher volatility during the FY20-23 period compared with FY16-19.
The report highlighted that potatoes, onions and tomatoes were the primary reason for the volatility in food prices, rising 9.1% on average during this period, compared with 4.8% annual inflation for other vegetables.
Tomatoes, Onions and Potatoes account for a 5% share of India’s food basket.
The high prices of tomatoes was one of the reasons for the vegetable price shock, which drove retail inflation to a 15-month high of 7.4% in July and 6.8% in August.
Data released earlier this month showed that inflation eased to 5% in September as tomato prices declined.
“Prices of tomatoes (a major driving force) and several other vegetables fell sharply by September.
