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Wholesale-retail inflation gap the widest in vegetables and pulses

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Retail food inflation as measured by the consumer price index has persistently remained high since the last few months while the wholesale price index hasn’t risen in tandem.

CPI food inflation has remained above seven per cent all through the lockdown months and even after the curbs were removed in June.

The divergence between the two has always been the bane of Indian agriculture, but the gap widened substantially during the lockdown as supplies were disrupted.

After the lockdown slowly began being lifted June onwards, the variance too narrowed in the subsequent months, but not in a uniform manner across crops. The gap has been persisting in pulses and vegetables. 

Vegetables

The difference between wholesale and retail prices was a staggering 20.46 percentage points in April, the first month after the lockdown. It narrowed down to 17.7 percentage points in May, and to 11.07 percentage points in June and 3.09 percentage points in July.

The variance rose again to 4.38 percentage points in August as retail vegetable prices rose after the lockdown was lifted and also due to widespread disruption in the supply of some crops from the farms due to excessive monsoon rains in August.

The country received 27 per cent excess rainfall that month--the highest during the past several years. The excess damaged several early-sown vegetable crops, mainly tomatoes and onions, whose prices are rising sharply now.

According to some reports, the entire monsoon-sown onion crop in Karnataka, the largest growing state after Maharashtra, has been damaged, causing a spike in prices in the interim. 

The tomato crop in southern India too was damaged due to the rains.

But as the data showed, though consumers might have been paying more for these crops, farmers have gained little as the divergence in vegetable rates has started widening again after contracting slightly in July.

In milk too, the variance between wholesale and retail prices has narrowed over the last few months starting July.

Pulses

The other crop that seen a sharp rise in CPI inflation in August is pulses.

CPI inflation in pulses that month was 14.44 per cent, following a trend seen since April, but the WPI inflation for the same has been consistently falling.

However, the divergence between the two has narrowed during the past few months and from an 8.15 percentage points in April, it came down to 4.58 percentage points in August.

Market watchers said one big reason for pulse prices remaining high is that pipeline stocks are fast drying and Nafed has raised the chana sale price from Rs 5,100 a quintal to over Rs 5,500 the past few weeks, spiking retail prices.

There has also been some talk that sowing acreage in the case of some kharif pulses, particularly in states such as Madhya Pradesh, is not in consonance with the numbers disclosed by the government.

As per the Central government, till last week kharif crops had been sown on about 110.45 million hectares, or 5.68 per cent more than 104.51 million hectares sown last year.

The final sowing figures for the kharif season are expected to be closed on October 1.

Sowing of pulses, coarse cereals and oilseeds is almost over, while rice planting is still in progress in the ongoing kharif 2020 season, notwithstanding the Covid-19 pandemic.

Normally, sowing of kharif crops begins with the onset of the southwest monsoon in June. Harvesting starts in October. Rice is the main kharif crop.

Going forward 

In the coming months, much will depend on how the kharif output comes about particularly in case of crops such as pulses.

In the case of vegetables, though, much will depend on how the supply disruption due to Covid and also how the excess rains pan out in the coming weeks.

A bumper kharif harvest will definitely boost the prospects of weakening of inflation, though it might not be very beneficial for the farmers.

Month April   May  June  July August
. WPI CPI WPI CPI WPI CPI WPI CPI WPI CPI
Cereals 3.63 7.75 3.56 7.30 2.72 6.49 0.75 6.96 -1.79 5.92
Vegetables 3.14 23.60 -12.25 5.45 -9.21 1.86 8.20 11.29 7.03 11.41
Pulses 14.63 22.77 12.54 21.06 10.10 16.68 10.24 15.92 9.86 14.44
Fruits 0.26 2.67 0.86 1.98 2.31 -0.68 -3.03 0.13 -0.25 1.00
Food Inflation 3.83 10.48 1.66 9.20 2.10 7.87 4.08 9.05 3.84 9.27



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