Pulse Inflation to Show Reduced Volatility Amid Monsoon Chaos, says CRISIL

Pulse Inflation to Show Reduced Volatility Amid Monsoon Chaos, says CRISIL

According to a report by CRISIL, despite the havoc caused by the monsoon in many states, retail inflation in pulses is expected to be less volatile this year. The combined weightage of pulses and pulse products in the Consumer Price Index (CPI) basket is 2.38%. In May, pulses retail inflation based on the Consumer Price Index (CPI) stood at 6.56%, surpassing both headline inflation at 4.25% and retail food inflation at 2.91%. 

CRISIL indicates that assuming the continuation of the cobweb phenomenon in pulses inflation, although less pronounced, the next peak could occur in 6 to 7 months. This phenomenon refers to cyclical price fluctuations caused by faulty producer expectations. Overproduction can result in a decline in prices and financial losses. Markets where hoarding is prohibited experience more severe cyclical price fluctuations. The government’s price stabilisation schemes could help mitigate the intensity of the next peak, despite the impact of truant weather patterns last year and delayed and uneven rains this year affecting pulses sowing. 

The recent removal of the 40% procurement ceiling for key pulses (tur, urad, and masur) by the government is expected to encourage farmers to sell any amount of their produce, leading to increased sown area in future cropping seasons. Higher procurement also facilitates better price signaling through the announcement of Minimum Support Price (MSP). The Consumer Affairs Ministry has also taken steps to monitor and control prices, including the imposition of stock limits on certain pulses.  

CRISIL emphasizes that inaccurate price signaling was a significant factor contributing to the cyclical pattern of pulses production. Additionally, timely policy measures such as imposing stock limits on arhar and masur to discourage traders from hoarding supplies also help control price spikes. 

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