High food prices hurting India's poor, pain to persist

People buy onions at a market, during a nationwide lockdown in India to slow the spread of COVID-19, in Dharavi, one of Asia's largest slums, during the coronavirus disease outbreak, in Mumbai, India, April 7, 2020. REUTERS/Francis Mascarenhas/File Photo

New Delhi: India's retail inflation may stay elevated for at least three more months after hitting a six-year high in October, as excess rain has damaged standing crops and seedlings, while edible oils that the country imports have become expensive.

The high prices are a particular cause of concern for India's hundreds of millions of poor people, who have already been squeezed by the coronavirus pandemic and its impact on an economy that contracted a record 23.9 per cent in April-June.

Food items such as onions, potatoes, eggs, meat and tomatoes have a nearly 46 per cent weight in India's retail inflation basket. Food inflation shot up to 11.07 per cent in October, the highest in nine months according to data released on Thursday, sending overall retail inflation surging to 7.61 per cent.

"We were expecting a hefty correction in vegetable prices but just before harvesting, excessive rainfall damaged crops," said Amol Ghule, a vegetable trader based in the western state of Maharashtra that dominates India's onion and oilseeds production.

Parts of India's richest state was battered by untimely rain last month.

"Many farmers are having to prepare seedlings again for planting and this will delay supplies from the new season crop," Ghule said.

High spending

In the past three months, onion prices have more than quadrupled in India, while soy oil prices have rallied 23 per cent.

International prices of edible oils, meanwhile, have hit record highs due to falling stocks. India imports 70 per cent of its edible oil from countries such as Malaysia, Argentina, Indonesia and Ukraine.

"Palm oil prices have jumped in Indonesia and Malaysia, soy oil in Argentina and sunflower oil in Ukraine," said B.V. Mehta, executive director of industry body the Solvent Extractors' Association.

Poultry prices are rising as Indians flock to chicken shops for some extra protein during the pandemic, while production is low because many chicken farms were closed due to India's virus lockdown.

Also, high vegetable prices have made eggs more affordable for many poorer people, said Uddhav Ahire, chairman of poultry supplier Anand Agro Group.

Economists say the government's extra spending to revitalise the economy could also keep inflation high. This fiscal year ending March 31, the government is likely to overshoot its budgeted spending of $407.80 billion by more than $60 billion.

Worried about stoking inflation further, the Reserve Bank of India has paused its monetary easing since August, after cutting rates by 115 basis points since March.

For 29-year-old Karan Solanki, now the sole earner in his family after his mother lost her job during the pandemic, higher food prices mean watchful purchases of even the most basic items.

"We are unable to buy ration in bulk for a month anymore,"    said Solanki, who runs errands at a private company in Mumbai and lives with his parents and sister.

"We only buy in small quantities for daily use and avoid using expensive vegetables as much as we can."

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