Retail inflation is expected to increase on account of high vegetable prices in India. Farmers and traders believe vegetable prices will stay on the higher end for longer, due to delayed planting caused by erratic monsoon rains and damaged ripening crops. 


According to a Reuters’ report, prices generally start lowering down from August, when harvest starts coming to the market, but due to tight supplies, they are expected to stay sky-high until October this year. 


Vegetable prices have a 6 per cent weighting in the overall consumer price index (CPI). These have been rising 12 per cent month-on-month and touched a seven-month high in June, according to official data.


Anil Patil, a Mumbai-based trader, said, “The monsoon is disrupting the vegetable supply chain. This year, we are going to witness higher vegetable prices for a prolonged period.”


The high prices of basic food items such as onions, chillies, tomatoes, and ginger will make it difficult for the Reserve Bank of India (RBI) to lower rates for the year, the report states. 


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Gaura Sen Gupta, India economist at IDFC FIRST Bank, stated, “Supply-side measures would be best suited to temper the rise in food prices. The RBI is expected to remain on pause till at least December 2023”. 


Tomato prices in particular, have been touching the sky, increasing more than 1400 per cent in the wholesale market to a record Rs 140 per kg in the past three months, stated Moneycontrol, citing the report. 


The tomato crop, in India’s third biggest tomato-producing region, Karnataka, has suffered badly because of poor rains, higher temperatures, and a virus outbreak, the farmers noted. Srinath Gowda, a farmer who manages 200 acres of farmland, said, "Supplies are just 30% of normal as yields."


While some states have received little to no rainfall, others have witnessed rains with a flood-like intensity. States in the northern and western regions of the country, which account for major vegetable production, received about 90 per cent above-average rainfall, while some in eastern and southern regions experienced up to 47 per cent less rainfall, according to the data from the weather department. 


According to HSBC economists, retail inflation is expected to reach 6.5 per cent in July, above RBI’s target range of 2 to 6 per cent. Experts now believe the RBI will maintain high interest rates till mid-2024, the report claims. 


Although supply is expected to start recovering in the coming weeks, but it will not be sufficient to affect prices, said Rajendra Suryawanshi. A vegetable trader in Pune, Suryawanshi noted, “Meaningful correction in prices would begin from September, and in October, we could see prices falling to a normal level.”