Food inflation in India has remained constant at 8 percent since November 2023. The main reason is supply shortages due to last year’s drought and this year’s heat wave. What is special is that despite predictions of early monsoon rains and above-normal rainfall, this inflation is not likely to ease anytime soon. Rising food prices, which account for almost half of the total consumer price basket, have kept retail inflation above the central bank’s target of 4 percent. So RBI cannot reduce interest rates. Let us also tell you what are the main reasons why food inflation is not going down. Also, what can be the measures by which food inflation can be stopped or reduced?
Why is food inflation rising?
Last year’s drought and this year’s ongoing heat wave have significantly reduced the supply of foods such as legumes, vegetables and cereals. At the same time, restrictions on food exports and reductions in import tariffs have had very little impact. Although the supply of vegetables usually decreases during the summer months, this year’s drop is much greater. Temperatures in almost half of the country are rising between 4 and 9 degrees Celsius above normal, causing deterioration of harvested and stored vegetables and making it difficult to plant crops such as onions, tomatoes, eggplants and spinach.
Farmers usually prepare vegetable seedlings before the monsoon rains from June to September and then plant them in the main fields. However, this year this work has also been hampered by extreme heat and water shortages, which has further increased the vegetable shortage.
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Why didn’t the monsoon help?
The monsoon, on which India’s agricultural production depends, arrived early in the southern tip of the country and moved quickly to cover the western state of Maharashtra ahead of schedule. However, this initial momentum soon slowed, resulting in an 18 percent rainfall deficit so far this season.
In addition to causing the heat wave, the weak monsoon has delayed the planting of summer crops, which will only be able to grow at full capacity with sufficient rainfall. Despite light rain in June, the India Meteorological Office has forecast above-average rainfall for the remainder of the monsoon season.
When will prices drop?
If the monsoon is activated again and spreads across the country according to the normal calendar, vegetable prices are expected to drop from August onwards. However, floods or prolonged drought in July and August can alter the production cycle.
Due to tight supply, prices of milk, cereals and pulses are unlikely to drop anytime soon. Wheat supplies are dwindling and the government has not announced any plans to import the grain, which will drive up wheat prices even further.
Rice prices may rise as the government on Wednesday increased the minimum support price or purchase price of rice by 5.4 percent. The supply of legumes such as pigeon peas, black peas and chickpeas was severely affected by last year’s drought and will not improve until the new season’s crops are harvested. Sugar prices are likely to remain high as there is a possibility that production could decline next season due to lower planting.
Can government intervention help?
The answer is yes. Government intervention, such as restricting exports and simplifying imports, can help reduce prices for some food products. However, the government cannot do anything about the prices of vegetables, which are very perishable and difficult to import.
The government has implemented several measures to reduce food prices by restricting exports of sugar, rice, onion and wheat. However, these measures have proven unpopular among farmers and the ruling Bharatiya Janata Party suffered a defeat in general elections in rural areas.
State elections are approaching in Maharashtra and Haryana, where a significant population of farmers will decide the outcome. The central government is trying to win back support from farmers and may allow prices for some crops to rise rather than taking aggressive action before elections in October.
