Extreme weather conditions have proven to be more than just a concern for electricity bills, as they are significantly impacting vegetable prices and retail inflation. This issue has been exacerbated by the increasing intensity and frequency of weather disturbances, as highlighted in a recent report by Crisil. The report emphasized the need to address climate risks to mitigate the impact on vegetable production and prices.
Vegetables have played a crucial role in food inflation, with their contribution being much higher than their share in the food index, accounting for about 30% of food inflation in fiscal year 2024. While the spotlight has often been on skyrocketing prices of tomatoes and onions, other vegetables like garlic, ginger, brinjal, parwal, and beans have also seen substantial spikes in inflation rates. Interestingly, fiscal year 2024 witnessed significant volatility in vegetable prices, ranging from a low of -7.9% to a high of 37.4%.
The anomalies in vegetable prices were not solely due to the usual seasonal fluctuations but were also influenced by disturbances like warmer weather, irregular rainfall patterns, and pest attacks. The report underlined how these factors disrupted the typical seasonal price trends, leading to higher average vegetable inflation in fiscal year 2024. With vegetables holding a weightage of 6.04% in the consumer price index-based inflation basket, it is the third highest in the food and beverages subgroup, after cereals and milk. In March, the consumer price index (CPI) inflation stood at 4.85%, whereas vegetable inflation soared to 23.84%, ultimately contributing to an overall inflation rate of 7.68% in the food and beverages basket.
Moreover, concerns about extreme weather events and their potential impact on inflation were also echoed in the monthly bulletin of the Reserve Bank of India. The bulletin warned that extreme weather events, in conjunction with geopolitical tensions and volatile crude oil prices, could pose risks to inflation. A red alert issued by the World Meteorological Organization (WMO) emphasized the global warming crisis and the likelihood of 2024 surpassing the record set in 2023 as the hottest year on record. The WMO report, along with data from the Indian Meteorological Department (IMD), highlighted the urgent need for a collective response to address the escalating extreme weather events.