The CPI inflation has increased to 5.09 per cent in Feb’24 compared to 5.1% in Jan’24. It is interesting to note that among all items, the vegetable inflation is showing the ever-increasing trends, it has increased 30.25 per cent in Feb’24, whereas eggs (10.69%), meat and fish (5.21%) have shown some upside. A positive trend is that despite remaining firm, spices (13.51%), pulses and products (18.90%), and cereals (7.60%) have shown some softening trends. The core inflation has declines, partly due to the firming of retail prices by the FMCG companies and continuous firming of retail inflation, reducing purchasing power of common people.
We have done a detailed study on vegetable inflation, since it has increased the most in recent times, 30.25% in Feb’24 according to CSO data. Interestingly, an in-depth trend analysis over the years have shown that since Nov’23, the Garlic has increased the most (detailed data in excel), whereas Ginger, Onion, Tomato (the last two items have shown rising trends in Feb’24). The supply trends remain erratic due to weather conditions. Unseasonal rainfalls, cyclones have also disrupted supply scenario as well as destruction of crops, the yield remains low during the winter season. The production has been adversely impacted also due to reduction in rabi Garlic planting area in Madhya Pradesh, the largest garlic producing state.
The inflation trend for the Garlic has firmed up and have shown rising trends since Nov’23, for instance, from Jan~Feb’24, it has increased by 40.73 per cent (YOY% growth) whereas in previous month it has increased by more than 24 per cent. Tomato prices have also increased by 3.7 per cent (index increases during Jan-Feb ’24 from 42.01 to 38.31, and 33.46 during Dec’23. Largely, garlic, ginger, tomato, onion remain very volatile since last couple of months.
State wise, inflation has increased the most in Odisha (7.55%) followed by Telangana (6.71%), Haryana (6.28%), Assam (6.02%). Odisha’s dependency on imported fuel and lack of certain supply of essential intermediaries have posed certain uptick in inflation rate in the State. Small businesses have faced many challenges including increase in the operating costs.
Interestingly, while core inflation in India is softening, the food inflation, especially the vegetable inflation remains firm and volatile. It has been observed that garlic, ginger, tomato, onion remain very volatile since last couple of months. The RBI is likely to hold rates, despite real rates being high due to the uncertainty posed by the vegetable inflation. Globally also, US inflation remains a bit sketchy, for which Fed is also likely to keep rates at hold. The rate cut expectation could be firmed once vegetable inflation and some items in food inflation would start showing declining trends.
Vipin Malik, Chairman & Mentor, Infomerics Ratings.
Sankhanath Bandyopadhyay, Economist, Infomerics Ratings.
Athar Imam Raza, Officer-Economic Analysis.