Context: Persistently high food inflation, anticipated to exceed 6%, is likely to continue due to ongoing price surges in vegetables, food grains, and pulses.
Key Points:
Causes of Food Inflation:
Price hikes in vegetables, food grains, and pulses are driving food inflation.
The disruption in this year’s monsoon has led to extensive crop losses, impacting supply chains and causing scarcity.
Monsoon’s Impact on Food Prices:
Typically, a normal monsoon ensures adequate production, stabilizing retail prices. Conversely, a deficit monsoon results in reduced production, causing higher retail food prices.
However, this year’s monsoon, though within the “normal” range as per the IMD, has been erratic and uneven, resulting in a 7% deficit in rainfall.
Inflationary Trends:
July witnessed a significant rise in the consumer food price index by 11.51%, the highest since October 2020. Consequently, the consumer price index increased by 7.44%.
Forecasts suggest continued food price escalations in August, surpassing initial expectations.
Erratic Monsoon’s Impact:
Despite recent years experiencing bumper food grain production during normal monsoons (2019-22), food price inflation remained above 6% in three of those years, highlighting the impact of erratic weather.
Losses and Impact on Production:
Unusual weather events, such as extreme rainfall impacting onion and tomato crops in Maharashtra, contributed to the unprecedented price rise in July.
From 2016-21, extreme weather events damaged crops over 36 million hectares, causing farmers a substantial loss of US $3.75 billion.
The loss of production in such vast areas could lead to a demand-supply crisis even during a normal monsoon year.
Conclusion:
Persisting high food inflation, driven by erratic monsoons and consequent crop losses, continues to impact vegetable, food grain, and pulse prices. The irregularity in monsoon patterns challenges the conventional understanding of its role in food pricing, emphasizing the need for resilience and adaptations in the face of evolving weather patterns.
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