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Consumers might take some solace from Reserve Bank of India (RBI) Governor Raghuram Rajan's recent statement that vegetable prices were likely to come down in the near future. After all, dealing with a consumer price inflation of 11 per cent, as it was in November, can make a mess of monthly budgets.
Atul Thakar, employee with an electronics company in Mumbai, however, wonders if Rajan's words will ever come true. "In the past year, our monthly grocery bill has gone up 30 per cent," he says. On fruits, by 20 per cent.
During the Diwali season, the prices of potatoes, onions and tomatoes rose to Rs 25, Rs 67 and Rs 38 a kg. Compare these with the levels in January 2013 - potato at Rs 16 a kg, onion at Rs 18 a kg and tomato Rs 16 a kg.
That's not all. At the start of the year, RBI indicated that interest cost on loans would come down. By the end of the year, adverse economic conditions and a burgeoning current account deficit forced it to raise rates in September and October. Thankfully, RBI held its hands in December.
The good part is that banks, on their part, have been not been too aggressive in raising rates. Increases during the year were nominal, as most banks raised these by only 10-25 bps. In fact, State Bank of India and HDFC cut these by 15-35 basis points last week. However, pressure on equated monthly instalments has not eased much. For the spendthrift, the interest on credit cards is up as well.
Then, diesel prices were deregulated partially and have been rising by 50p a litre each month. That is, the year saw these up by Rs 6.62 a litre. Petrol prices have inched up this year by Rs 4 a litre.
Salary raises were also not too great. In the latest findings by executive search firm Pedersen & Partners, issued in September, Indian companies gave a 9.8 per cent annual salary rise.
To battle the inflation menace, Thakar, whose household also has a wife, teenage daughter and mother-in-law, has been shopping for grocery from a neighbourhood shop offering most items at wholesale prices. This way, he does not compromise on the quality of food and also gets it cheaper.
Better news might be around the corner. Sunil Sinha, director-public finance at India Ratings, says a turnaround in prices will most likely start in December; by February, prices will be moderate, with supply-side problems easing. "Thereafter, there could be some pressure again on vegetable prices in the summer," he says.
If you look at the budget of a family of four (husband, wife and two children) living in Mumbai, you will agree with Thakar. Business Standard took a list of basic food items and observed the monthly household budget had gone up by nearly eight per cent between December 17, 2012 and December 17, 2013. The accompanying table shows one spent Rs 3,883 a month as of December last year on basic food items. This expense has gone up to nearly Rs 4,200, driven by vegetable prices.
Madan Sabnavis, chief economist at CARE Ratings, says inflation has gone to double-digit levels largely due to a demand-supply mismatch on vegetables and fruits. "High inflation can be attributed to vegetable supply failure after a protracted monsoon," he says.
Economists feel the government will try to curb inflation before the polls scheduled by May. It will release stock from Food Corporation of India into the market to bring down prices, at best by March, they say.
In the past year, onion prices increased 150 per cent in Mumbai, while potato prices were up 50 per cent and those of tomato rose close to 120 per cent. Data compiled by CARE Ratings from the Ministry of Consumer Affairs data shows a kg of potatoes cost Rs 16 on December 17, 2012, and Rs 24 on December 16, 2013. Tomato prices have risen from Rs 16 to Rs 35 a kg and onion prices from Rs 18 to Rs 45 a kg.
If you look at the price of apples and bananas, taken from the Agricultural Produce Market Committee in Mumbai, the prices have fallen steeply. In December 2012, apple cost Rs 65.77 a kg, which fell to Rs 16.45 a kg this December. Banana prices fell from Rs 25.38 to Rs 13 a kg between December 2012 and 2013.
It is possible your budget has increased more than the one in the table. That is because the table has included the most basic of food articles and on particular dates. If you are a regular at branded retailers or even at your local grocer, you might be seeing a higher jump in your budget.
Rice, which hit Rs 30 a kg between June 17 and July 31, has moved up 15.4 per cent since December 2012. Last December, it was at Rs 26 a kg; it moved to Rs 30 this December. Wheat flour rose only 3.2 per cent from Rs 31 in the middle of December 2012. Tur dal prices rose six per cent. Its highest price point in the year was Rs 86 a kg in the recent past (between November 15 and November 30). The price of a one-kg packet of sunflower oil has gone down by around 6.5 per cent, from Rs 96 last December. Mustard oil has risen 11.2 per cent.
Non-vegetarian items have also seen a price rise, says Sabnavis. The new consumer price index for all urban consumers for meat, poultry, fish and eggs has risen 11 per cent. The index stood at 130.5 in December 2012 and rose to 145.1 (the highest in the past year) in November 2013.
In sum, interest and inflation rates constantly hurt the household budget this year. If one goes by Rajan's words, 2014 could be better.
