The stalled monsoon has delayed Kharif crop sowing and the persistent heat wave in parts of India is fuelling food price hikes, particularly in vegetables, whose average retail prices rose by about 45.1% this month, economic researchers noted on Monday.
Following a rapid onset to cover half the country in the first half of June, there was no further advance of the monsoon over the past week, and cumulative rainfall was 18% below the long period average as of June 23, Barclays India economists Shreya Sodhani and Amruta Ghare pointed out in a report.
Rains have been particularly scanty in the central region, while they were normal in the south. Consequently, reservoir storage levels were below historical averages and last year’s level as of June 20, with storage in 146 key reservoirs at about 21% of total capacity.
“The stalled rainfall across majority of the country has led to a delay in Kharif sowing and a significant delay will impact food output and the Rabi sowing season, as farmers will have less time to prepare their fields after the Kharif harvest,” said a report by Emkay Global Financial Services.
The delayed monsoon progress has also led to persisting heatwave conditions, leading to lower supply of vegetables in particular, along with pulses and cereals, the report noted. Average retail prices were up 9.4% for cereals, 13.5% for pulses and 45.1% for vegetables. On a weekly basis, vegetable prices were up 9.7% last week, Emkay’s analysts estimated.
Retail food prices were up 8.7% in May, with vegetable prices rising 27.3%. At the wholesale level, vegetables inflation had hit a nine-month high of 32.4%.
“Vegetable prices may decline from August, if the monsoon picks up; however, prices of milk and pulses will stay high due to tight supplies. Cereals could also see elevated prices, with the government announcing a 5.4% increase in MSP for paddy for the current Kharif marketing season,” the Emkay report said.
Barclays India expects a marginal impact on headline inflation from the recent hike in minimum support prices for the kharif crop as the increases were relatively lower for most crops compared with last year.
Stressing that it is “still early in the season”, Ms. Sodhani and Ms. Ghare noted that crop sowing is usually done between July and August that normally receive the maximum rains of the season. The India Meteorological Department has forecast an ‘above normal’ monsoon for this year.
