India to witness severe food inflation due to extreme weather

Rising prices of food items, particularly that of vegetables, have spiked retail inflation to a 68-month high of 7.59 per cent in January 2020, according to the National Statistical Office.

While the inflation figure captured headlines, a crucial analysis of the reasons behind this sustained increase in food prices slipped public attention. Extreme weather events have led to crop damages, leading to a collapse in the supply of vegetables at a time of the year when they usually flood the markets.

On the basis of year-on-year comparison, vegetable prices have gone up by 50.19 per cent since January 2019. They have spiked by 45.56 per cent in rural areas / markets during this period and by 59.31 per cent in urban areas.

Of the six categories of consumption items used to reach the overall inflation figure, the food and beverages category recorded the highest price rise, thus increasing the overall inflation rate.

Unseasonal rains and other weather events continue to disrupt the normal crop cycle and also crop yield. Since last year’s monsoon, at least 12 states have recorded longer spells of rains, spreading into the winter monsoon cycle of October-December.

A longer summer monsoon delayed sowing and harvesting. But it also raised the hope that higher moisture level would lead to higher Rabi crop yields. But during the winter monsoon — the primary season for vegetable crops — unusually high rainfall days were reported from across the country. It caused damages to standing crops.

In Matupali village of Odisha’s Subarnapur district, the weekly market is buzzing with one question: “Why is there no distress sale of vegetables?”

Like this market of an obscure village, difficult to pin point on the state map, shoppers in vegetable markets across Odisha find vegetable prices unusually high for this point of time.

Usually, in winter and particularly around February, seasonal vegetables like cauliflower and tomato crash to Rs 1-2 per kg. In Matupali’s market, cauliflower was selling at Rs 10 per kg and tomato at Rs 20 per kg respectively.

A typical weekly village market is usually the main market for local small producers and farmers. They have an explanation for this ‘price rise’ of vegetables. Since the monsoon last June-September, rains have continued; often they have experienced extreme spells of rains.

This has delayed the sowing and harvesting. As the rain continued till February, many standing vegetable crops got damaged. The farmers’ usual harvest has come down.

Even summer food grain crops like paddy had not been harvested till January-end. To sum up, the vegetable crop was delayed and got damaged in the continuing rains.

Even though a high retail price for vegetables would lead to better returns for farmers, their overall production has come down.     

The erratic monsoon and more rainy days have already set the food inflation high since the last monsoon. Consumer food price inflation hit a six-year high of 14.12 per cent in December 2019.

One could gauge the impact of unfavourable weather events on food pricse from the fact that inflation picked up at fast pace, from 2.99 per cent in August 2019. In September 2019, it hit 5.11 per cent and in the next month, it reached to 7.89 per cent. In November 2019, inflation hit double digits — 10.01 per cent — for the first time since December 2013.

Way back in 2014, when inflation was an emotive political agenda, the Reserve Bank of India pointed out: “One of the traditional explanations for rising food prices has been the supply-side shocks related to weather either because of droughts or floods.”

Between 1956 and 2010, there were nine double-digit inflation episodes. Out of these, 77 per cent were caused by weather-related events like drought.

Non-profit Oxfam recently simulated the impacts of extreme weather events on price rise. According to this simulation: “The average price of staple foods such as maize could more than double in the next 20 years compared with 2010 trend prices (or by 2030) – with up to half of the increase due to changes in average temperatures and rainfall patterns.”

This simulation has another scary forecast that is relevant to India. It says that besides the price doubling by 2030, one or more extreme weather events could spike food prices to a level of two-decade cumulative price rise.

The fast food inflation during August-December 2019 in India could be an example of this when unseasonal and extreme weather events disrupted the crop cycle and damaged standing crops.

According to Oxfam, there would be a 107 per cent increase in the price of processed rice by 2030 due to extreme weather events.

“This scenario models the simultaneous occurrence of poor harvests in India and South East Asia and indicates that it could lead to an increase in 2030 in the global average export price of processed rice of around 25 per cent,” the Oxfam model forecasts.

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