Extreme Weather Events Push Up Vegetable Prices in India
Extreme weather conditions are not only impacting electricity bills but also pushing up vegetable prices, which have dominated retail inflation for over a year. A new report by Crisil highlights the rising intensity and recurrence of weather disturbances leading to frequent bouts of volatility in vegetable prices.
The report notes that vegetables were responsible for about 30% of food inflation in FY24, much higher than their 15.5% share in the food index. While surging prices of tomatoes and onions made headlines, the price rise was not limited to these vegetables. Garlic and ginger saw triple-digit inflation, while other vegetables like brinjal, parwal, and beans also experienced a spike.
Fiscal 2024 saw huge volatility in vegetable prices, ranging from a low of -7.9% in May 2023 to a high of 37.4% in July 2023. The report attributes this volatility to warmer weather, uneven rains, and pest attacks. These disturbances disrupted the typical seasonal decline in vegetable prices, leading to higher average inflation in FY24.
Vegetables hold a significant weight of 6.04% in the consumer price index (CPI) inflation basket, making them the third highest contributor in the food and beverages sub-group. This, coupled with the high inflation in vegetables, drove the inflation in the food and beverages basket to 7.68% in March.
The report also highlights the potential risk of extreme weather events and prolonged geopolitical tensions on inflation. The World Meteorological Organisation (WMO) has warned about global warming and the possibility of 2024 surpassing 2023 as the hottest year on record. The report emphasizes the urgent need to address climate risks and their impact on vegetable production and prices.