Economists predict that vegetable prices will remain high despite rapid monsoon
Agricultural experts and economists predict that vegetable prices, particularly potatoes, will remain high in the near term, despite the monsoon’s rapid progress. Heatwaves in several parts of the country this summer damaged crops, resulting in a demand-supply mismatch, they claim.
Vegetable inflation remains a major concern for policymakers, rising to 29.3 percent in June from 27.4 percent in May. The increase was widespread, impacting both TOP (tomatoes, onions, potatoes) and non-TOP vegetables.
“Prices of potatoes are anticipated to be firm for the next few months,” said an agricultural analyst, adding that this year’s tuber shortage is likely to be felt as early as October, as opposed to the general trend of November and December.
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Weather-related damage in the key potato-producing states of West Bengal and Uttar Pradesh has hampered production, fueling price increase. Potato output this year is expected to be around 58.99 million tonnes, down from 60.14 million tonnes last year, according to the agriculture ministry’s first advance estimate. “Large farmers and traders are also holding their stocks in anticipation of price rises in the coming months,” said a trader, adding that loading in cold storages was also lower this year.
Prices for other vegetables, aside from potatoes, are expected to remain higher, though changes in year-on-year inflation rates across items will be affected by the base, according to Aditi Nayar, chief economist and head of research and outreach at ICRA.
In July 2024, average tomato prices are up by ~50 percent MoM to ₹62/kg (up to July 16). However, these are significantly lower than the peak levels of over ₹100/kg seen in the same month previous year (amid a three-fold MoM increase in July 2023). This is expected to lead to a large y-on-y deflation in tomatoes in July 2024, as opposed to 20 percent inflation seen in June 2024.
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“This would exert a downward pressure on the overall vegetables inflation print in the current month,” the economist said. According to Dipti Deshpande, principal economist at Crisil, vegetables are the most vulnerable to weather adversity among agricultural commodities, and weather-related issues caused higher vegetable inflation in June.
“Overall, it’s a wait-and-see situation,” Deshpande explained. Despite a positive base effect from last year, food inflation soared to 9.4 percent, driven primarily by persistently high vegetable prices, which have remained in double digits for eight months.
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