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Retail inflation decreased to below 6% this month, which falls within RBI’s comfort zone; however, several headwinds remain.
Care Edge recently issued a note noting how vegetable and pulse prices continue to be unacceptably high, potentially impacting households’ purchasing power in the short-term and potentially dampening consumer sentiments.High Price
High Price | Price of Vegetables
Indian consumers may notice an increase in vegetable prices over the last three months, though this increase may only be temporary. As temperatures warm up and weather becomes warmer, fruit and vegetable costs should increase significantly; according to The Economic Times, apples and bananas have seen their prices go up nearly 10% monthly, while tomatoes have seen weekly hikes of 15% or so.High Price
Vegetable prices have experienced a dramatic surge due to reduced kharif production and tight supplies. According to data from Barclays, onion prices have seen an 13% spike since July. This has put additional pressure on other food categories such as wheat and pulses but did not cause headline inflation to spike significantly.High Price
But reduced freight and commodity costs won’t immediately reach consumers; retailers typically are tied into contracts that set their prices months in advance. Shoppers are already feeling the pinch – 92% of respondents to an IRI survey indicated that food costs have gone up over time.High Price
Other inflationary pressures are mounting, including those from an ever-rising dollar that has caused import prices to surge and from severe drought reducing cattle herds in the U.S. which has driven meat prices higher. Furthermore, inflationary trends are being experienced for baby food/formula/sugar/substitutes/crackers etc.High Price
High Price | Price of Pulses
Pulses, such as dried beans, peas or lentils are an excellent source of protein, fibre and other essential nutrients. With low amounts of fat content and plenty of dietary fibre to assist digestion, pulses are excellent tools for weight loss as they also lower cholesterol levels and promote digestion. They are often known as the poor man’s food for their nutritional benefits at an economical cost; making an integral part of any healthy diet.High Price
India has experienced weather-reduced pulse crop harvests that led to increasing import needs and an increase in price both domestically and globally. But, thanks to production increases from major exporting nations such as Canada and Australia in 2016/17, global supply levels have significantly increased and prices on domestic markets have since decreased substantially.High Price
Given that insufficient monsoon rains reduced dal acreage by nearly 10%, inflationary pressures on pulses are expected to remain elevated. State agencies purchased pulses through minimum support price (MSP), after discussions with farmer unions. As such, most major pulses except urad and mung have remained below their respective MSP levels since February; contributing directly to retail inflation trends; however a rebound in vegetable prices may help ease some pressure in coming months.High Price
High Price | Price of Spices
Even though food inflation fell to its lowest level since March 2015 in March, it still exceeds the Reserve Bank of India’s stated target of 4%. While its decrease was mostly attributable to supportive bases for prices, they continue to rise and the heat wave poses the threat that they might even accelerate further.
Spice prices, particularly jeera and turmeric varieties, have increased by more than 22% this year as reduced crop acreage due to pest problems has created supply-demand imbalances that has resulted in increasing supply-demand imbalances. While spices only represent a minor portion of food inflation overall, their prices are quickly passed on to other food items like cereals and milk products and thus contributing to overall inflationary trends.
However, other key consumer categories including clothing and footwear as well as personal care have witnessed significant decreases in inflation rates – an indicator that inflation overall appears to be declining; but food inflation still poses a great threat.
Food inflation is projected to remain high due to factors including an expected below-average monsoon and administrative interventions into cereal markets. Reserve Bank of India Governor Shaktikanta Das has warned that inflation needs to be closely watched due to multiple factors – these include potential for subdued monsoon rainfall, El Nino effects and global developments.
High Price | Price of Milk
Economic reports may show inflation is on its way down, yet Americans shopping at grocery stores on a weekly basis still feel its effects. Prices remain high for eggs, milk and canned fruits – making shopping experience less than satisfying when price increases become evident in items such as these, according to Ross Steinman from Widener University Psychology Department. “You cannot ignore price increases when they appear every week in your cart or carton,” Steinman notes.
Food prices have seen dramatic fluctuations due to their dependence on other costs, including increased wages for workers at processing plants, warehouses and supermarkets; additionally consumers are spending more money on higher quality items like organic produce and specialty milk.
Even so, inflation has seen some relief this year due to lower fuel prices and more people dining at home instead of eating out at restaurants; but many analysts predict this moderation in inflation will soon return.
Problematic is that milk production costs are linked with overall inflation and feed prices; Vitaliano suggests that high feed prices will push milk prices higher; conversely, lower feed costs will lead to reduced milk prices.
