Legumes and cereals, onions threaten an upward spiral of inflation

In the coming months, legumes and cereals with onions will be added in  retail and wholesale.  Pulses  have a weightage of 15.30 percent in retail inflation based on consumer price index, while cereals have 3.46 percent in producer inflation based on wholesale price index (WPI). According to data released on Tuesday, pulses WPI inflation accelerated to 19.4 percent in October from 17.7 percent in September. Another set of data released on Monday showed that core inflation was nearly 19 percent in October, compared with 16.3 percent in September. In the grain retail trade, inflation  remained at double digits. 

 The growth of pulses and cereals is due to two reasons. First, the estimated lower output of current taxation. Second, sowing during Rabi (like November 10) is less than last year. Although the government hopes that the sowing will improve in the coming days, the market is not so optimistic. Experts believe that the increase in the price of pulses and the continued rise in the prices of cereals and onions will break the downward trend of retail inflation in the coming months. The positive thing is that  the prices of TOP tomatoes and potatoes have decreased. Economists at HDFC Bank highlighted in a note that pulse inflation rose to a 41-month high in October, while cereal inflation remained elevated during the  month. “Based on mandi prices, onion and tomato prices increased by 59 per cent and tomatoes by 20 per cent,  while prices of pulses and cereals increased in November, which is likely to put pressure on headline inflation”, that the  onion price increase (which began on October 2 with a halving) appear in full in the November print. 

 CARE Chief Economist Rajni Sinha said the recently released first  estimate of Kharif food production showed a cross-category decline compared to last year’s last estimate. Oil crops (17.7 percent), pulses (6.6 percent) and cereals (4.5 percent) fell the most. While “these estimates are being revised (generally trending higher), high risks to the outlook for food inflation remain if output remains close to  current estimates”, However, some experts believe that prices are likely to fall. Dharmakirti Joshi, chief economist at Crisil, said retail food inflation had a mixed trend – vegetable prices  fell,  pulses strengthened – close to 20 percent, whole grains held steady at 11 percent, keeping overall food inflation flat. “By the Christmas quarter, we expect  food inflation to moderate somewhat as the kharif crop hits the market with government intervention”.

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