As rising tomato prices continue to make headlines daily, the overall rise in vegetable prices now exerts pressure on the inflationary outlook for the near future. In June, food inflation rose to 4.6 per cent from 3.3 per cent last month, on the back of continuing hike in vegetable prices.
The share of food inflation in the overall inflation has also seen a rise. From 36 per cent last month, it has now touched 44 per cent. The rise in vegetable price is largely due to the erratic monsoon that has swept across parts of the country, and the subsequent flooding in some North Indian plains. Although price hike in vegetables is seasonal, the situation this year is very dire, according to vendors in New Delhi.
“Prices go up every year during monsoon, but the cost of tomatoes never went so high. There is a major dip in supply due to the sudden rains, the stocks coming from Himachal are getting damaged,” said Das, a vegetable vendor in Delhi’s Dwarka region.
Das sells tomatoes for Rs 150-200 now. It was less than Rs 100 not long ago, he added. A report by Care Edge ratings agency also notes that the rise in vegetable prices in more than the seasonal pattern observed in the past years.
The sudden price rise has also led to fights breaking out in mandis where vegetables and fruits are sold wholesale. Ram Prasad, a vegetable hawker, said, “I am also keeping less tomatoes in my stall because half my customers are not buying it. With the constant rain and the fights in Azadpur mandi over tomato prices, we are facing hardships.”
Das is also upset with the government response so far on the matter. “We get tomatoes from wholesale markets and sell them at Rs 150-200 per kg, but the Kejriwal government is sleeping and not helping in controlling the prices at the wholesale mandis. People are bargaining hard, but we cannot lower the price as we ourselves have to buy at a higher price,” said the disappointed vendor.
As people are required to spend more on vegetables now, it has an indirect effect on sales of other goods as well. People are buying fewer fruits now because more of the household budget is going into buying vegetables, said a fruit seller in the capital city.
Small Businesses Suffer
As vegetable costs become out-of-reach for the common man, it has made life difficult for those who run small dhabas and eateries in cities. Thirty-five-year-old Kanhaiya, who runs a small dhaba in Delhi’s Safdarjung area, is worried that his venture will soon run into losses.
“The surge in vegetable prices has severely impacted our business. Due to high prices, we are struggling to buy quality vegetables. The costs have increased and therefore our margins have dropped a lot,” he said.
Babu Ram, who runs a small canteen, does not have many options left when it comes to serving sabzi for his customers. He finds the present cost of capsicum, tomatoes and ladies fingers too high. “Only potatoes are affordable as they’re still being sold cheap. But I can’t make sabzi out of potato alone every day. Then people will stop eating from my place,” he said.
If the rising prices are not brought under control quickly, it can have serious impact on the inflation target that Reserve Bank of India (RBI) has set for the country. According to the RBI, consumer price index (CPI) inflation should not breach the upper tolerance limit of 6 per cent. India’s retail inflation is at 4.81 per cent now, according to latest available data.
However, that might not continue for long, according to a recent report by State Bank of India (SBI). In its Ecowrap report for July, SBI noted, “We believe if tomato prices increase without any substantial change in potato & onion then average inflation in Q2 FY24 will come near 5.8 per cent year-on-year.” But a corresponding rise in the prices of tomato, onion and potato (TOP) can become a cause of worry since they form a staple in Indian kitchens.
“If the TOP inflation increases, then CPI might come around 6.0% yoy in Q2 FY24,” the report added.