Opinion A troubling double-digit dal-roti inflation

Reserve Bank of India (RBI) Governor Shaktikanta Das, last week, said that headline consumer price index (CPI) inflation remains vulnerable to “recurring and overlapping food price shocks”. He couldn’t have been more right. The latest CPI numbers for October show overall annual retail inflation at 4.87 per cent, falling for a third successive month from 7.44 per cent in July. Moreover, “core” CPI inflation, which excludes price rise in food and fuel, was at a 43-month-low of 4.28 per cent in October. And given negative fuel and light inflation (minus 0.39 per cent), it is food prices that are the problem. At 6.61 per cent, food inflation was higher than the general CPI inflation. Within food, however, there are volatile components such as vegetables, that are prone to seasonal supply shocks, translating into high inflation as seen for tomato in July-August and for onion more recently. These often self-correct with fresh crop arrivals; vegetable inflation has already plunged, from 37.4 to 2.7 per cent between July and October.

It’s the more sticky components of food inflation that should really worry the RBI and the government ahead of next year’s national elections. These specially pertain to cereals and pulses — in other words, dal-roti. Retail cereal inflation, at 10.65 per cent, has been ruling at double-digits for 14 consecutive months since September 2022. It has been similarly so for five months in pulses, with the current inflation of 18.79 per cent the highest since August 2016. This clearly has to do with a not-too-great monsoon. The Agriculture Ministry’s estimates show cereal production in the recent kharif season to be 6.6 million tonnes (mt) lower than last year’s, with rice output alone down from 110.5 mt to 106.3 mt. Production of kharif pulses is pegged to be the lowest since 2015, with shortfalls in tur (pigeon pea) as well as urad (black gram) and moong (green gram).

Advertisement

With the post-monsoon season (October-December) rainfall turning out 26 per cent below normal so far and El Niño’s effects projected to last through the spring and beyond, one shouldn’t place too much hope on the rabi crop either. The Narendra Modi government has managed the just-about comfortable wheat and rice stocks with the Food Corporation of India well, by restoring the original 5 kg/person/month quota for ration cardholders (from 10 kg during the Covid period) and stepping-up open market sales to cool prices. It must do more to augment supplies by scrapping the 40 per cent import duty on wheat and also those on yellow/white peas and chana (chickpea), now at 50-60 per cent. Cutting tariffs may encounter farmer opposition, but double-digit dal-roti inflation should be a greater government concern — both economic and political.