Rising Food Inflation on the Horizon?

Rising food prices

Will your grocery bill grow? Join us as we dive into the world of rising food prices. Also, understand how it will impact you.

Have you ever wondered why economists calculate Consumer Price Inflation (CPI)? It is a crucial number that measures the overall cost of living. Food inflation holds significant weight among the factors that shape the CPI, accounting for 46% of the index.

In June 2022, food inflation skyrocketed to 7.75%, causing the CPI inflation rate to reach 7.1%. However, in May 2023, food inflation dropped to 2.91%, resulting in a significant dip in the CPI inflation rate, now at 4.25%.

So, you see, there is a correlation between food inflation and CPI, indicating that when food inflation decreases, it eases the burden of rising prices in other sectors, leading to a lower CPI inflation rate. 

However, in the recent turn of events, we have seen a recent surge in food prices, and hence we arrive at the question, will we experience a rise in food inflation in the near future?

Let’s find out. 

What’s Happening?

Finally, the monsoon has hit several states of India, but there has been a delay. Hence, because of the slow arrival of monsoons and high temperatures, the prices of various food products have increased. As per a report by Economic Times, the cost of vital kitchen essentials like rice, rice products such as poha and puffed rice, as well as jowar, bajra, and chicken, has witnessed a significant increase of 5-15% within the last two weeks.

In the recent development, the price of tomatoes is making headlines too. According to CNBC TV18, the cost of tomatoes has surged by 60% to 70% on average in June 2023. This price rise is attributed to delayed sowing, which has reduced tomato supplies in the market, causing a demand-supply imbalance. Consumers are facing higher prices due to the scarcity of tomatoes in the market. Moreover, except for onions and potatoes, most vegetables have seen a price rise too. 

Food inflation is expected to rise after this sudden price increase.

How Will It Impact You?

The price rise is expected to impact the prices on the food menu of eateries and restaurants. Moreover, higher staple costs will pinch your pockets because of the sudden increase. 

Will it Impact CPI Inflation?

As food inflation has a significant weightage in CPI, we may see a high CPI. Arvind Sanger, Managing Partner of Geosphere Capital Management, recently raised concerns about the unfavourable start of the monsoon season. According to him, there is a possibility that inflation may reemerge. Hence, RBI may have to hike rates. 

That’s it for today. We hope you’ve found this article informative. Remember to spread the word among your friends. Until we meet again, stay curious!

*The article is for information purposes only. This is not an investment advice.

*Disclaimer: https://tejimandi.com/disclaimer  

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