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Domestic budget is set to rise further, at least for some time, with edible oil adding to the strain put by tomato and onion prices. Experts hope that monsoon will possibly bring some good news for overall food inflation.
On Wednesday, the Statistics Ministry released data related to retail inflation based on Consumer Price Index (CPI). It pointed to headline retail inflation dropping to a year low of 4.75 per cent. The data simultaneously showed that food inflation was still stubborn at 8.7 per cent mainly on account of sustained higher price of vegetables, pulses and cereals. However, inflation related with spice and milk appeared to be slowing down.
TOP on the rise
Reports from various research agencies showed that higher demand, coupled with the ongoing heatwave, has affected prices of TOP (Tomato-Onion-Potato). According to a research report by QuantEco, after six months of decline, onion prices have risen by 21 per cent so far in June owing to mismatch between demand and supply.
“Mandi arrivals of the new onion crop have been slow, alongside an increase in demand ahead of Eid later this month. Farmers and stockists have been slow in bringing the crop to the market in anticipation of higher prices ahead,” it said. Further, tomato prices rose by over 36 per cent and edible oil by 15 per cent.
A research report by HDFC Bank said food inflation momentum is expected to pick up in June/July in line with the seasonal trend. Mandi prices showed that vegetables (potato, tomato, and onion) are up 5.2 per cent month-on-month basis, while that of pulses are up 1.7 per cent month-on month in June till date.
A Crisil research report found that non-TOP inflation has eased, but not sufficient to arrest the rise of TOP. Vegetable inflation was also rigid at 27.3 per cent compared with 27.8 per cent. TOP inflation rose to 46.5 per cent, while non-TOP declined to 18.8 per cent. The worrying factor is edible oil. The pace of deflation in edible oils slowed for the fourth consecutive month. Inflation in edible oils stood at -6.7 per cent in May compared with -9.4 per cent in April. This was led by slowing deflation in mustard oil and refined oil, the report said.
Monsoon hopes
All hope is centered around monsoon and the end of heatwave which will have a bearing on foodgrains as well as vegetables. QuantEco’s research report said: “Typically, in years of ‘Above normal’ rainfall, agri output overshoots its trend growth by a sizeable margin. To put this in perspective, of the 18 past episodes of ‘Above normal’ rainfall since 1970, agri GDP growth was higher than 4 per cent in 15 of the years.”
HDFC Bank expects food inflation to hover around 7.5 per cent in June. However, there could be some relief on food prices during Q2 FY25. “A favourable monsoon (IMD’s forecast of 6 per cent surplus rainfall) in the upcoming south-west monsoon season along with a favourable base effect is likely to support a moderation in food prices,” it said.
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