The main issue is not with tomatoes, but rather with other things, according to economists Pranjul Bhandari and Aayushi Chaudhary, who stated in a paper. Despite the fact that concerns about rising food prices are justified. It is “legitimate” to be concerned about cereals, such as rice and wheat, as this could result in higher costs.
For the year ending in March 2024, HSBC has kept its inflation projection of 5% but sees bigger risks if cereal inflation picks up. Data on rice sowing and rainfall distribution will be crucial in the coming weeks, according to the economists.
The analysts warned that tepid seeding in northwest India and insufficient rainfall in the south and east could harm the rice crop and hinder shipments for India, the top exporter of rice in the world. They said, “This suggests that wheat, a partial substitute for the food staple, could have global price implications.”
A staple in Indian diets, cereals account for around 10% of the basket of goods measured by the consumer price index. Rising food costs caused retail inflation to reach a three-month high of 4.81% in June, which prompted economists to uphold their estimates of price increases for the year. As a result, the central bank may decide to hold rates for a longer period of time.
Prime Minister Narendra Modi must also control price pressures because he would be running in the national elections the following year. To control domestic pricing, the country last week barred the export of less expensive non-basmati white rice.
Prices for vegetables and pulses have skyrocketed as a result of insufficient monsoon rains in some regions of India and floods in other others. Inflation pressures were fueled by a more than 400% increase in the price of tomatoes since the year’s beginning as well as fluctuating onion and potato costs, which are essential components of an Indian dinner.
The analysts stated that tomatoes are a short-cycle crop and price increases often reverse after two months. They stated that the price increases for oilseeds, sugar, and legumes might also be bearable.
