Heatwave expected to escalate food inflation, warn economists
Economists have cautioned that the ongoing heatwave could trigger a surge in food prices in the upcoming months. Senior analyst at India Ratings and Research, Paras Jasrai, predicts that food inflation will exceed 8% in June 2024. Furthermore, he anticipates pulses inflation to remain in double digits due to a strong base effect in 2QFY25. In June, the price of arhar surged by 33.7% in the wholesale market compared to last year.
Heatwave and delayed monsoon impacting farm income
Additionally, vegetable inflation remained high at 27.3% in May, according to Jasrai's analysis. Like Jasrai, Chief economist at CareEdge, Rajani Sinha, predicted that this phenomenon will keep the prices of perishables like vegetables and fruits high. "This phenomenon will keep the prices of perishables like vegetables and fruits high, impacting their yield and shelf life and thereby leading to lower supply," Sinha added.
Fruit inflation rises, vegetable inflation may ease
Meanwhile, Madan Sabnavis, chief economist at the Bank of Baroda, said "the present heatwave has taken a toll on vegetable supplies, with prices of potatoes, tomatoes, and onions rising, which will continue for another month or two." According to the agriculture ministry, potato and onion output in the 2023-24 crop year (July-June) is expected to be 56.76 million metric tons (MT) and 21.23 MT, down 6% and 20%. Fruit inflation also rose from 5.2% in April to 6.7% in May.
Lagging monsoon could further influence food prices
If the monsoon continues to lag, reservoir levels could also impact food prices. Current reservoir levels in India are at just 22% of their full capacity, lower than last year and about 8% below the decadal average. Sinha noted that the deficit in reservoir levels is more acute in areas such as Punjab, Rajasthan, Eastern Gangetic Plain and most states of Southern India.
