Vegetable Prices To Rise Further Before Cooling In September

Amid the impact of heatwaves and lower market arrivals, prices of key vegetables are expected to continue to rise until September, when fresh arrivals will hit the markets.

The south-west monsoon are playing catch up. After having been in deficit for June, the monsoon covered the entire country on July 2—six days before the normal date.

Going ahead too, the India Meteorological Department forecasts rainfall for July to most likely be above normal. That's over 106% of the long period average. Still, because of deficient rainfall so far and heatwaves across large parts of the country in June, prices of several perishable agricultural commodities continue to rise, because of a decline in their market arrivals. The major impact of it is being seen in an increase in prices of staple vegetables such as tomatoes, onions and potatoes.

Retail prices of onions and potatoes in Mumbai are currently up by two times as compared to an year ago, while prices of tomatoes were up by almost 60%. Onions are currently retailing at over Rs 50 a kg, while tomatoes are selling at over Rs 80 a kg in Mumbai.

Prices of these commodities have seen a significant uptick and that's expected to keep food inflation elevated in the near-term, said Madan Sabnavis, chief economist at Bank of Baroda. Depending on the crop in question and the south-west monsoon trajectory, prices are likely to rise further until September when fresh arrivals will hit markets, Sabnavis explained.

Heavy monsoons also generally tend to push up prices in July and August, said Teresa John, economist at Nirmal Bang Institutional Equities.

Food and beverage price momentum is likely to increase 2.4% month-on-month and by 8% year-on-year in June, as compared to 0.7% month-on-month in May, and 7.9% annually, according to estimates by Kaushik Das, chief economist at Deutsche bank. Higher food and beverage prices are likely to push June CPI inflation closer to 5%, he said.