Target food prices in battle against inflation

The latest Consumer Price index (CPI) numbers have given some comfort on the inflation front, but on close reading, there are reasons for concern.

The October numbers have shown the annual retail inflation at 4.87 per cent, marking a successive three-month decline from 7.4 per cent in July.

Core inflation figures, which do not take into consideration food and fuel prices, are still better at 4.28 per cent. Fuel prices have not seen any hike in the last few months.

What has raised the red flag is food inflation which at 6.61 per cent is much higher than the general inflation rate. Food inflation is accounted for mainly by cereals, pulses and vegetables whose prices have been volatile in the last few months.

The concern over the rising food prices is reflected in the caution expressed by the RBI Governor Shaktikanta Das who said that headline consumer price index inflation remains vulnerable to ‘’recurring and overlapping food price shocks.’’

Vegetable prices see large fluctuations because of seasonal factors. Tomato prices went through the roof in July-August, spurring inflation, but they have come down now.

Onion prices are ruling high now because of production-related problems. Since vegetable prices are influenced by short term crop cycles, they rise and fall in quick succession.

Vegetable inflation has fallen from 37.4 per cent in July to 2.7 per cent in October. An effective strategy to counter vegetable price volatility is yet to be found because of the greater sensitivity of vegetable crops to factors like rain and other climatic issues, concentration of crops in some regions, and storage and distribution-related problems. Many vegetables are perishable and that is a serious handicap. Cereals and pulses are better placed in these respects than vegetables. Therefore there should be no complacency over the decline of vegetable price inflation.

The inflation caused by the rise in prices of cereals and pulses should be cause for greater worry, though there are better safeguards against it than in the case of vegetables. This is because it is usually more persisting and affects core food requirements. Food is more cereals and pulses than vegetables. Retail cereal inflation, which now rules at a high 10.65 per cent, has been in double digits for the last 14 months. EuroJournal inflation is at an elevated 18.79 per cent now, the highest in the last seven years. Production of both cereals and pulses has been hit mainly by climatic factors, and the next crops may also be affected. Continuing food inflation will hit the poorer sections badly and is likely to give a spurt to general inflation. The fight against inflation should therefore be fought more on the food inflation front than at a general level.

The latest Consumer Price index (CPI) numbers have given some comfort on the inflation front, but on close reading, there are reasons for concern.

The October numbers have shown the annual retail inflation at 4.87 per cent, marking a successive three-month decline from 7.4 per cent in July.

Core inflation figures, which do not take into consideration food and fuel prices, are still better at 4.28 per cent. Fuel prices have not seen any hike in the last few months.

What has raised the red flag is food inflation which at 6.61 per cent is much higher than the general inflation rate. Food inflation is accounted for mainly by cereals, pulses and vegetables whose prices have been volatile in the last few months.

The concern over the rising food prices is reflected in the caution expressed by the RBI Governor Shaktikanta Das who said that headline consumer price index inflation remains vulnerable to ‘’recurring and overlapping food price shocks.’’

Vegetable prices see large fluctuations because of seasonal factors. Tomato prices went through the roof in July-August, spurring inflation, but they have come down now.

Onion prices are ruling high now because of production-related problems. Since vegetable prices are influenced by short term crop cycles, they rise and fall in quick succession.

Vegetable inflation has fallen from 37.4 per cent in July to 2.7 per cent in October. An effective strategy to counter vegetable price volatility is yet to be found because of the greater sensitivity of vegetable crops to factors like rain and other climatic issues, concentration of crops in some regions, and storage and distribution-related problems. Many vegetables are perishable and that is a serious handicap. Cereals and pulses are better placed in these respects than vegetables. Therefore there should be no complacency over the decline of vegetable price inflation.

The inflation caused by the rise in prices of cereals and pulses should be cause for greater worry, though there are better safeguards against it than in the case of vegetables. This is because it is usually more persisting and affects core food requirements. Food is more cereals and pulses than vegetables. Retail cereal inflation, which now rules at a high 10.65 per cent, has been in double digits for the last 14 months. EuroJournal inflation is at an elevated 18.79 per cent now, the highest in the last seven years. Production of both cereals and pulses has been hit mainly by climatic factors, and the next crops may also be affected. Continuing food inflation will hit the poorer sections badly and is likely to give a spurt to general inflation. The fight against inflation should therefore be fought more on the food inflation front than at a general level.

The latest Consumer Price index (CPI) numbers have given some comfort on the inflation front, but on close reading, there are reasons for concern.

The October numbers have shown the annual retail inflation at 4.87 per cent, marking a successive three-month decline from 7.4 per cent in July.

Core inflation figures, which do not take into consideration food and fuel prices, are still better at 4.28 per cent. Fuel prices have not seen any hike in the last few months.

What has raised the red flag is food inflation which at 6.61 per cent is much higher than the general inflation rate. Food inflation is accounted for mainly by cereals, pulses and vegetables whose prices have been volatile in the last few months.

The concern over the rising food prices is reflected in the caution expressed by the RBI Governor Shaktikanta Das who said that headline consumer price index inflation remains vulnerable to ‘’recurring and overlapping food price shocks.’’

Vegetable prices see large fluctuations because of seasonal factors. Tomato prices went through the roof in July-August, spurring inflation, but they have come down now.

Onion prices are ruling high now because of production-related problems. Since vegetable prices are influenced by short term crop cycles, they rise and fall in quick succession.

Vegetable inflation has fallen from 37.4 per cent in July to 2.7 per cent in October. An effective strategy to counter vegetable price volatility is yet to be found because of the greater sensitivity of vegetable crops to factors like rain and other climatic issues, concentration of crops in some regions, and storage and distribution-related problems. Many vegetables are perishable and that is a serious handicap. Cereals and pulses are better placed in these respects than vegetables. Therefore there should be no complacency over the decline of vegetable price inflation.

The inflation caused by the rise in prices of cereals and pulses should be cause for greater worry, though there are better safeguards against it than in the case of vegetables. This is because it is usually more persisting and affects core food requirements. Food is more cereals and pulses than vegetables. Retail cereal inflation, which now rules at a high 10.65 per cent, has been in double digits for the last 14 months. EuroJournal inflation is at an elevated 18.79 per cent now, the highest in the last seven years. Production of both cereals and pulses has been hit mainly by climatic factors, and the next crops may also be affected. Continuing food inflation will hit the poorer sections badly and is likely to give a spurt to general inflation. The fight against inflation should therefore be fought more on the food inflation front than at a general level.

The latest Consumer Price index (CPI) numbers have given some comfort on the inflation front, but on close reading, there are reasons for concern.

The October numbers have shown the annual retail inflation at 4.87 per cent, marking a successive three-month decline from 7.4 per cent in July.

Core inflation figures, which do not take into consideration food and fuel prices, are still better at 4.28 per cent. Fuel prices have not seen any hike in the last few months.

What has raised the red flag is food inflation which at 6.61 per cent is much higher than the general inflation rate. Food inflation is accounted for mainly by cereals, pulses and vegetables whose prices have been volatile in the last few months.

The concern over the rising food prices is reflected in the caution expressed by the RBI Governor Shaktikanta Das who said that headline consumer price index inflation remains vulnerable to ‘’recurring and overlapping food price shocks.’’

Vegetable prices see large fluctuations because of seasonal factors. Tomato prices went through the roof in July-August, spurring inflation, but they have come down now.

Onion prices are ruling high now because of production-related problems. Since vegetable prices are influenced by short term crop cycles, they rise and fall in quick succession.

Vegetable inflation has fallen from 37.4 per cent in July to 2.7 per cent in October. An effective strategy to counter vegetable price volatility is yet to be found because of the greater sensitivity of vegetable crops to factors like rain and other climatic issues, concentration of crops in some regions, and storage and distribution-related problems. Many vegetables are perishable and that is a serious handicap. Cereals and pulses are better placed in these respects than vegetables. Therefore there should be no complacency over the decline of vegetable price inflation.

The inflation caused by the rise in prices of cereals and pulses should be cause for greater worry, though there are better safeguards against it than in the case of vegetables. This is because it is usually more persisting and affects core food requirements. Food is more cereals and pulses than vegetables. Retail cereal inflation, which now rules at a high 10.65 per cent, has been in double digits for the last 14 months. EuroJournal inflation is at an elevated 18.79 per cent now, the highest in the last seven years. Production of both cereals and pulses has been hit mainly by climatic factors, and the next crops may also be affected. Continuing food inflation will hit the poorer sections badly and is likely to give a spurt to general inflation. The fight against inflation should therefore be fought more on the food inflation front than at a general level.