The key ingredient for Indian curries and chutneys is so ubiquitous that economists are keeping a close eye on prices for signs of when the central bank may cut rates.
The country usually produces more onions than it needs. But this year, heavy rains and flooding damaged stockpiles as well as the monsoon crop in the main growing areas, according to Siraj Hussain, a visiting senior fellow at the Indian Council for Research on International Economic Relations in New Delhi.
The government sought to control prices by banning exports, restricting hoarding and increasing imports, yet the rally continued with shipments from overseas not due to arrive until Dec. 27.
Prices surged to a record 111 rupees per kilogram on Dec. 17, according to Narendra Savaliram Wadhavane, a secretary at the state-run wholesale market. Average wholesale prices are still about 80 rupees per kilogram, compared with about 15 rupees in June and July.
Hussain, who is also a former agriculture secretary, warned that the government’s decision to limit onion stockpiles could hurt farmers when prices come down again as they’ll be forced to sell despite poor profit margins. Prices are historically volatile, sinking to as low as 0.5 to 1 rupee per kilogram toward the end of 2018.