Why is the humble Dal Chawal giving Indian homes a heartburn? Economic Survey decodes the price pinch

In the last two years, food inflation in India has nearly doubled, climbing from 3.8% in FY22 to 7.5% in FY24. This sharp increase underscores the growing vulnerability of food prices to climate change and other disruptions. 

As the cost of kitchen staples soars, it's crucial to understand the factors driving this trend.

The recent Economic Survey highlights how extreme weather events—heat waves, erratic monsoons, unseasonal rains, hailstorms, and droughts—have significantly impacted food production. Vegetables and pulses, essential components of the Indian diet, have been particularly hard hit.

Tomatoes: In July 2023, tomato prices skyrocketed due to seasonal fluctuations in production, region-specific crop diseases like white fly infestations, and early monsoon rains in northern India.

Onions: Several factors contributed to the spike in onion prices. Rain during the last harvesting season compromised the quality of rabi onions, delays in kharif sowing, prolonged dry spells affecting kharif production, and trade measures by other countries exacerbated the situation.

Pulses: The production of tur and urad pulses suffered due to adverse weather over the past two years. Slow sowing progress during the rabi season and climatic disturbances in southern states further affected urad production. Similarly, the area and output of gram were lower compared to the previous rabi season.

Milk: The price of milk has been rising since early 2023. A decrease in artificial inseminations during the peak pandemic days and higher animal feed costs led milk cooperatives to increase prices to offset these expenses. However, milk price inflation moderated by the end of FY24.

The Reserve Bank of India has consistently raised concerns about rising food prices. Food inflation, which has hovered around 8% year-on-year since November 2023, remains a significant challenge. With food accounting for nearly half of the overall consumer price basket, this persistent inflation has kept headline inflation above the central bank's 4% target, preventing interest rate cuts.

The Economic Survey also points out that India's real GDP growth for FY25 is projected to be between 6.5% and 7%, with the government aiming for inclusive growth. However, elevated food prices continue to be a major obstacle, affecting household budgets and overall economic stability.

Addressing food inflation requires a multi-faceted approach. Enhancing agricultural productivity, improving supply chain resilience, and mitigating the impacts of climate change are critical steps. The government’s ongoing efforts to reform agricultural practices and invest in infrastructure are essential to stabilizing food prices and ensuring long-term food security.

As India navigates these challenges, understanding the intricate dynamics of food inflation will be crucial for policymakers and consumers alike.