Persistent inflation in cereals and pulses ahead, says D K Joshi of Crisil

Inflation in cereals and pulses will be with us for the next couple of months, D K Joshi, Chief Economist, Crisil, said.

“While the price inflation of vegetables may be seasonal, we may have to bear with inflation in cereals and pulses for the next couple of months,” he said speaking at a Moneycontrol panel on food inflation on July 18.

Inflation in cereals has been in the double digits for the past few months. India's headline retail inflation broke its four-month falling streak rising to 4.81 percent in June, from 4.31 percent in May. The increase has been attributed to a steep jump in vegetable prices.

Additionally, a Crisil report has pointed out that in the past five months, the inflation rate of pulses has nearly doubled and is likely to rise further in the next 6-7 months.

“This is a risk to overall inflation as it has a 45 percent weight in consumer price. Short-term uptake is not a worry but when prices increase on a sustained basis it becomes a matter of concern,” Joshi added.

The government measures

The government has taken several steps to mitigate this price rise with timely interventions, as per Abu Huzaifa, Deputy Director, Department for Promotion of Industry and Internal Trade (DPIIT).

The government has intervened via the National Agricultural Cooperative Marketing Federation of India (NAFED) to stabilise the rise in vegetable prices. It has increased the minimum support price (MSP) for kharif by 7-8 percent for market stabilisation.

“The purpose of government is to stabilise prices and the government has taken several steps across verticals to control food inflation,” Huzaifa said.

Since last year, when food inflation was driven by supply chain disruption due to the Ukraine-Russia conflict, the government has taken several steps. Wheat exports were banned and duties on edible oil imports were lowered.

Further, the government this year has imposed stock limits on tur and urad to bring down prices risen due to hoarding. The same has been done for wheat stocks as well.

'Let market forces play out'

However, Gunvant Patil Hangargekar, General Secretary, All India Kisan Sangarsh Coordination Committee (AIKCC), believes government intervention is unnecessary.

“The government should let market forces play out instead of intervening. Prices vary every season depending on natural phenomena. You can stock pulses and rice but cannot stock vegetables. The current NAFED intervention for vegetables is hurting farmers by bringing overall prices for markets down. If the intervention is against farmers, they will stop sowing the said crop,” he cautioned.

The AIKCC official suggests that the government only check for manipulation of prices.

Crisil’s Joshi said that a long-term plan to keep the volatility of prices under check needs to be worked on. “Ample buffer stocks can help with price moderation as and when required,” he added.

Watch the whole discussion here