Sluggish monsoon sparks new fears as vegetables push up food inflation
NEW DELHI: A double-digit spike in vegetable prices pushed up annual wholesale inflation for a second month in May, official data showed on Tuesday, turning the focus of worried policymakers to the monsoon rains that have slowed this week.
An increase in the cost of petrol and diesel by more than 5% since May 1, and in prices of foods such as sugar and milk in the last month, could further heat up prices. Government figures released on Monday showed consumer inflation in May climbing to a two-year-high.
Given that the central bank has set a medium-term goal of limiting inflation to five% by March 2017, hardening inflation complicates efforts to cut lending rates necessary to boost investment.
But what has economists worried is the slow progress of the imminent monsoon, a key factor in food price inflation owing to its outsize impact on farming in India that remains highly dependent on the annual rains. Parts of the country have seen two back-to-back droughts.
On Tuesday, the India Meteorological Department (IMD) asked farmers in Maharashtra, which was to receive the rains from last week, to “go slow” with sowing, indicating it was expecting a delay in the arrival of the monsoon. The state is a top farming state.
IMD’s Agrimet section said farmers may begin tilling activities but should hold off on sowing to ensure seeds were not wasted.
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“It is necessary to have good monsoon rainfall consistently for a few days for the seeds to grow into a good crop,” N Chattopadhyay, Deputy Director General Agrimet, IMD, told reporters.
The monsoon has advanced into various parts of the Bay of Bengal, north-eastern states and some parts of sub-Himalayan West Bengal and Sikkim. On the other hand, it remains stuck in the southern states and will only advance into Maharashtra in the next four days.Tuesday’s data showed the annual rise in foodstuffs was at a steep 7.88% in May against 4.23% the month before — a build-up of as much as 4.47% in just two months.
Inflation in vegetables stood at 12.94%, a sharp rise from 2.21% a month earlier. Pulses inflation remained stubborn high at 35.56%.