Monsoon as a unitary weather phenomenon is no more a valid indicator for food prices as its progress and distribution have changed completely
Tomato crops were ravaged by unusual weather events, leading to the unprecedented price rise in July. Photo: iStock High retail inflation will continue to haunt Indians for the next few months. Going by all indications and forecasts by various agencies, it would remain above six per cent for a longer period. This high inflation is primarily driven by the rise in food prices, which was not expected to linger for so long. Prices of vegetables, foodgrains and pulses continue to rise and are expected to do so in the near future.
Usually, as the monsoon progresses, food inflation tends to moderate, ultimately flattening the retail inflation curve. However, this usual correlation between a normal monsoon and food inflation has not been observed this year.
The southwest monsoon has entered its last month. The monsoon is within the normal range (as defined by the India Meteorological Department) as of August 22, with a deficit of seven per cent from the normal rainfall.
Also read: Food prices are expected to rise more, and cost may be too heavy to bear for many
After erratic progress and uneven rainfalls, the monsoon seems to be back on track to be declared a normal one. If this happens, this will be India’s fifth consecutive normal monsoon.
Why then is food inflation not coming down? Instead, the first three months of the monsoon season have reported unusually high retail inflation driven by the rise in food prices. In July, the consumer food price index rose by 11.51 per cent, the highest since October 2020. This resulted in the consumer price index rising by 7.44 per cent in July.
In August, as economists and agencies forecast, the food price will continue to rise at a higher rate than expected. Global financial services group Nomura has said the retail inflation will be above 6 per cent due to the rise in food prices.
It seems that the usual and seasonal relationship between monsoon and food inflation is no longer in play. In the last four normal monsoon years (2019-2022), foodgrain production has been bumper or record-breaking each year. But consumer food price inflation has been above six per cent in three years (barring 2021-22). If a normal monsoon or rainfall is no more a deciding factor for food inflation, what else is causing price hikes?
This is where the new normal caused by climate change comes into operation. Usually, a normal monsoon means good production and, thus, moderate prices at the retail level. Or, a deficit monsoon means less production, thus high retail prices of food items. The same factor still dictates food prices, but in the new normal scenario, the monsoon has been disrupted so much that there are widespread crop losses even in a normal monsoon year.
Of late, policymakers and economists have started attributing food inflation to extreme weather events impacting large areas even though scattered in spread. Cumulatively, such weather events destroy crops to the extent that the usual supply chain is disrupted and even lead to scarcity. This has an immediate impact on food prices.
So, the monsoon as a unitary weather phenomenon is no more a valid indicator for food prices as its progress and distribution have changed completely. Extreme weather events destroying onion crops in major onion-producing states like Maharashtra add to the food inflation. Tomato crops were ravaged by unusual weather events, leading to the unprecedented price rise in July. Currently, in Punjab, paddy crops have been destroyed due to floods which will ultimately lead to a dip in production.
Every day this monsoon season, at least two instances of unusual weather events hitting the state have been reported. Each of them led to local loss of crops. During 2016-2021, extreme events such as cyclones, flash floods, floods and landslides caused crop damage in over 36 million hectares, a $3.75 billion loss for farmers in the country.
The loss of production in such large areas will ultimately lead to a demand-supply crisis even in a normal monsoon year. This new equation between monsoon-food prices must be recognised to tackle inflation in the new climate.
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