Retail price inflation for wheat, rice, jeera, tur remains on the boil

Government imposes limits on the quantity of wheat that traders, wholesalers can hold until March 31

The retail price inflation rates of rice, wheat, and some pulses, such as tur, remained elevated in May, explaining the government’s measures regarding these items. Also, retail prices of jeera (cumin seeds) flared up last month by over 50 per cent.  

Still, the food inflation cooled down to an 18-month low of 2.91 per cent and the overall retail inflation eased to a 25-month low of 4.25 per cent.

The consumer price index (CPI)-based inflation rate of wheat remained in double digits for a year, even as it eased to a 10-month low of 12.61 per cent in May, against 15.39 per cent in the previous month. This was despite the high base of 9.45 per cent in May last year.

In a first in 15 years, the government on Monday decided to impose stock limits on wheat for traders, wholesalers, retailers, big chain retailers and processors. The order will be applicable with immediate effect until March 31, 2024.

The rate of price rise in rice climbed down to 11.33 per cent in May, from 11.37 per cent in April, but remained in double digits for eight months in a row. This was partly because of a low base of 2.83 per cent in May 2022.

The effect of high inflation rates in wheat and rice was partly blunted because the government is providing free foodgrain to 800 million people as part of a scheme that is slated to run this calendar year.

In line with wheat inflation, the rates of price rise in other related products were also high despite a slight moderation in May. For instance, baked breads saw inflation moderating to 10.36 per cent in May, against 11.34 per cent in the previous month. Similarly, inflation in suji came down to 11.15 per cent from 12.82 per cent and in maida to 14.36 per cent from 17.02 per cent.

Among pulses, tur (arhar) witnessed an inflation rate of 16.78 per cent in May, against 13.80 per cent in April. The tur inflation rate has been in double digits for six months. It had witnessed deflation of 3.84 per cent in May last year.

Overall, the inflation rate in pulses and related products increased to 6.56 per cent in May this year, from 5.28 per cent in April.

But inflation in pulses, other than tur, remained modest, even as for urad, it climbed to 4.96 per cent in May, from 4 per cent in April. Prices of tur generally have an effect on urad, too.

Some spices, especially jeera, witnessed sharper inflation rates. Jeera’s retail prices climbed 58.55 per cent in May, against 45.41 per cent in April. Jeera has been witnessing double-digit inflation since April 2022. 

Jeera prices are on the boil amid fears of a more-than-expected decline in production in the key growing region of Rajasthan, besides some damage to the standing crop in Gujarat due to the unseasonal rainfall in March. The two states account for the bulk of jeera production in the country.

The spice is sown around October and the harvest starts in February; March is the month of peak arrivals.

S Mahendra Dev, a professor at ICFAI, Hyderabad, said the outlook on inflation in the prices of these crops and food inflation, in general, depends on how El Niño develops.

“Though there are buffer stocks, food inflation may rise if there is monsoon deficiency in rain-fed areas,” he said.

The India Meteorological Department (IMD) in its second stage forecast last month had said the monsoon rainfall this year is expected to be below normal over most parts of northwest India, but it could be “normal” over the remaining parts of India, including the main rain-fed zones.

Dev said even irrigated areas of the northwest region require sufficient groundwater. He said there is uncertainty over monsoon and the IMD is relying on the Indian Ocean Dipole (IOD). “We don’t know whether it will come or not,” Dev said

Madan Sabnavis, chief economist at Bank of Baroda, said while wheat production is expected to be high, procurement has been lower. This has led to higher prices in the market.

The problem started last year when the output was lower and due to the Ukraine conflict, part of the output was directed for exports, which finally led to an export ban, he said, adding higher prices today are due to a combination of last year’s spillover effects and higher MSP offered for the 2023 crop.

For pulses, due to the expectation of El Niño, prices have moved up for tur and urad as traders expect an impact on this segment, Sabnavis said.

He said with the recent hike in MSP for kharif crops, there will be some upward thrust on prices.

Non-compliance of wheat limits will attract punitive action: Centre

A day after imposing stock holding limit on wheat, the Centre on Tuesday said non-compliance of the limits would attract punitive action under the Essential Commodities Act of 1955, as it also directed state governments to ensure compliance with the June 12 wheat stock limit order and ensure disclosure of stocks, thereby checking unfair trade practices. Food Secretary Sanjeev Chopra also said that all entities had to update their stock levels every Friday.