Food Inflation Current Affairs - 2020

Retail Inflation at 5-year high of 7.35% in December, 2019

According to the data released by Ministry of Statistics and Programme Implementation on January 13, 2020, the food inflation increased to 14.12% in December 2019 as compared to 10.01% in November 2019. The CPI (consumer Price Index) rose to 7.35% as compared to 5.54% the previous month. The inflation was increase was mainly due to vegetables

Highlights

In December 2018, the food inflation was -2.65%. Vegetable inflation in urban areas touched 75% and at the country sides it was at 53%. Onion inflation doubled as compared to the previous month. It was 128% in November and it increased to 328% in December.

Analysis

The soaring crude oil prices due to the increasing tensions between Iran and US is the major reason. In the coming Budget, GoI is expected to increase its spending largely on infrastructure and cut taxes. This might stoke inflation further.

RBI

For the first time, the inflation has breached RBI’s target inflation of 4% (±2%). Predicting the situation, RBI had kept its policy interest rates on hold in its policy review of December 2019.

Implications

As inflation increases, the following can be expected

  • Increase in interest rates that will increase cost of borrowing
  • Slow-down in investment and economic growth

FICCI study on Onion Price Rise: India should follow Israel, Brazil

India is witnessing price hikes in retail onion up to Rs 100 per kg currently in November 2019. Government had introduced the TOP-Tomato Onion Potato Scheme in 2018-19 Budget to address this problem. However, the scheme has not taken off well.

The FICCI (Federation of Indian Chambers of Commerce and Industry) on Novmber 8, 2019, submitted a report to the GoI analyzing the problem. The Federation has also provided solutions to the current problems being faced in the country due to price rise of Onions.

Highlights of the study

  • Around 40% of total onions produced were damaged this year (2018-19) in the periods of heavy rainfall due to lack of post-harvest storage facilities
  • FICCI suggests long term solution studying Brazil and Israel models. It recommends low cost technologies for storing Onions
    • Israel stores onions in open ventilated warehouses. The warehouses are ventilated through continuous forced air.
    • Brazil stores onions in low-cost well ventilated silos systems. They are built at farm levels. Brazil also uses refrigerated rooms to store the vegetables.
  • The report says that for the first time GoI is incurring a buffer stock loss of 57,000 tons. This is 25% of the total buffer stock

India’s current measures

  • In India very few startups use farm level refrigeration for perishables
  • GoI through “Mission for Integrated Development of Horticulture” promoted low cost thatched bamboo storage. According to the study, India lacks in storage systems that sustain monsoon.
  • In India Onion is cultivated throughout the year in several places. Onion scarcity occurs only during July to September. In order to maintain regular supply during the lean period GoI stores onions in ventilated warehouses. The losses are high in these systems. Around 20% to 40% of onions are lost