By A Special Correspondent
First publised on 2023-02-15 09:25:24
After a couple of months of downward trend on the back of lower food inflation (mainly due to falling prices of vegetables and fruits), retail inflation in India, at 6.52% in January, has once again breached RBI's tolerance band. This is due to the rise in the prices of milk and milk products, eggs, fish and especially cereals. Cereal prices rose by 16.12% in January causing a spike in the overall retail inflation. This is a cause for worry as given the buffer stock of wheat with the government, the situation is going to worsen in the months ahead.
Although advance estimates released by the government for grain output this year show a record production of 324MT, this is mainly due to all-time high rice yield at 131MT. Though this is going to cool prices to some extent, wheat production is up by only 4.67% to 112MT from last year and India's wheat production had suffered due to untimely heat wave in March last year. Further, advance estimates for wheat can go for a toss as scientists have predicted that El Nino is set to return this year. If this results in a repeat of last years' heat wave in February-March, wheat production will suffer. The relief might come from prices of cooking oils as oilseed production has increased handsomely with mustard showing a healthy increase of 7%. But the overall retail inflation situation remains uncertain.The government needs to plan ahead. With low buffer stocks of wheat, it does not have much leeway to intervene in the market (although it did decide to release 3MT in open market to cool atta and wheat prices). Imports from Russia to tide over the situation are a viable option. The government should explore that as well as other measures to keep prices stable.