Pulse prices push retail inflation up to 5%

Pulse prices push retail inflation up to 5%

By SHAILENDRA TYAGI | NEW DELHI | 15 November, 2015
With the kharif crop expected to hit the market late November-early December, consumers might see some moderation in pulse prices.
Government data released this week shows that the higher inflation was mainly due to an increase in food inflation — at 5.25% — in October 2015.
Retail inflation (CPI) rose to 5% year on year in the month of October as compared to 4.62% in the same month last year. Government data released this week shows that the higher inflation was mainly due to higher food inflation — at 5.25% — in October 2015. The price of pulses rose by a staggering 42% while spices got costlier by about 10%. “The CPI inflation inching up was on expected lines,” says D.K. Joshi, chief economist, Crisil.  He adds that after being volatile over the last couple of years, pulse inflation has been stickier and is going to remain with us for some more time, till the new crop reaches the market. Pulses are grown both as a kharif as well as a rabi crop. With the kharif crop expected to hit the market later this month and early next month, consumers might see some moderation in pulse prices. With two sub-normal monsoons and the unseasonal rains early this year, the pulse production was adversely affected.  “Overall, while pulses are a cause for concern, food price pressures have not been broad-based despite deficient monsoons for a second consecutive year,” says Sonal Verma, research analyst, Nomura. Moving forward, while a broad based pick-up in food prices seems unlikely, the rising price pressure on pulses may temporarily push headline inflation above 5%  in the coming months. With the Federal Reserve’s lift-off approaching, — the Fed might raise interest rates in December 2015 — domestic inflation stabilising at 5% and a gradual recovery underway, analysts expect the RBI to remain on hold until end-2016.
Economists view the higher price of pulses as a big incentive for the farmers to grow more of it in the coming months (rabi).  “So, the prices would come down on such expectations of higher sowing,” says Joshi. Besides higher sowing, people also expect the government to convict the hoarders to deter them from exploiting the demand-supply mismatch to their advantage. Since the conviction rate in such cases has been very negligible, it does not actually deter the offenders from doing the same offence year on year. Experts warn that the improvement in incomes of the lower strata is going to create more demand for pulse based nutrition and hence, the government should simultaneously concentrate on raising the productivity of pulses in the country. Also, education inflation has moderated down to 6% from about 7% in early 2015 while health and household goods and services got dearer by over 5%. 
 

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