Heatwave to keep food inflation high in coming months, say economists

Vegetable inflation was a high 27.3 percent in May.

Heatwave is likely to exert pressure on food prices in the coming months, with pulses inflation remaining in double digits, according to economists.

“Food inflation would be above 8 percent in June 2024, then there is a very strong base effect in 2QFY25, but pulses inflation is expected to be in double digits,” said Paras Jasrai, senior analyst, India Ratings and Research.

Pulses inflation inched up to 17.1 percent in May compared with 16.8 percent in the previous month.

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Arhar, which is primarily consumed in the country, was trading 33.7 percent up in the wholesale market in June compared with the previous year.

It was trading at Rs 13,737.9 per quintal for the first fortnight in June.

Vegetable inflation was a high 27.3 percent in May.

“The prevailing heatwave in northern India and slowed progress of monsoon over the past week is anticipated to adversely affect farm income, food inflation, and general health conditions,” said Rajani Sinha, chief economist, CareEdge.

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“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 further added.

Fruit inflation had moved up to 6.7 percent in May compared with 5.2 percent in April, according to data released by the ministry last week.

Economists, however, point that vegetable inflation may not stay for long as a high base eases inflation.

“Last year vegetables inflation was in high double digits last year in 2QFY24,” said Jasrai.

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Reservoir levels may also come into play if monsoon lags.

Reservoir levels in India are at 22 percent of their full capacity, lower than last year and about 8 percent below the decadal average.

“The deficit in reservoir levels is more acute in areas such as Punjab, Rajasthan, Eastern Gangetic Plain and most states of Southern India,” said Sinha.

The government will release retail inflation numbers for July 12, 2024.