India’s Food Inflation Rises to 8% in September, Rates Unlikely to Fall this Year

Food price inflation in India is slowly turning out to be an important issue in wholesale as well as retail markets. India’s economy currently seems to struggle against slowing growth and higher inflation. The overall wholesale food inflation stood at 8.17% in September, versus 3.84 % in previous month. The inflation rate for pulses was 11.62%, with prices up 12.53% over the same month last year. The combined index for pulse prices has advanced from 149.8 to 150.9 b her hand the consumer price index (CPI) - based was reported at 6.7 per cent for August, from 6.73% in July, since food inflation could not fall below 9 per cent. Meanwhile at the retail level, the price index for pulse and derived products stood at 150.3 in rural areas and 152.2 in urban centers, compared to 149.3 and 150.8 respectively in August. It may be noted that the base year for the index is 2012 presently.  

In recent weeks rising prices of pulses has prompted the government deciding to open imports quotas for pigeon peas (Tur) and black mapte beans (Urad) as well as release more stocks bought under the minimum prices support (MSP) scheme. A 4 Lakh metric ton (MT) import quota was opened for pigeon peas with an expiry date of November 15, while 1.5 Lakh MT was opened for black mapte beans, with an expiry date of March 31. Earlier import duty rates for lentils dropped by 20 points, applicable till September end. The retail inflation has remained above the upper band of 6%, fixed by the Reserve Bank of India for nine consecutive months. Core inflation is also increasing gradually, and is currently near 6 per cent now, versus 4 per cent during early part of this year.  

The supply and production bottlenecks persist in the Agriculture sector and it will take some more time for the economic activity to come back to normal. At the same time domestic and export demand is slowly recovering towards pre COVID level. Besides, production of major Agricultural commodities shall be higher in 2020-21 due to sharp rise in sowing acreage. Reports say that the ongoing pandemic has adversely affected production of various nations. So India’s production surplus has raised export prospects as well, since India can export to these production-affected nations in near future. Festive season demand is another factor supporting the price rise. Therefore under given scenario consumers may continue observing higher prices than 2019-20, at least till remaining part of this year.