Economy
Why vegetable prices are burning a hole in your wallet
Summary
Several adverse events in FY24 kept vegetable prices from falling in the winter. The ongoing quarter may not bring much relief, but the prediction of a normal monsoon offers some hope.Just a year ago, tomato prices shot up so much that McDonald’s had to drop the ingredient from its burgers. The surge proved short-lived, thanks to government interventions and fresh crop arrivals, but true relief isn’t here yet. While vegetable prices have risen and fallen sharply over the past few months, they are still burning a bigger hole in your wallet than they did before the pandemic.
In the past three years, vegetable prices were nearly 25% higher on average than in the pre-pandemic years (FY15 to FY19), a Mint analysis showed. In those five years the annual average of the consumer price index for vegetables hardly moved — not because prices stayed calm, but because up-and-down cycles meant relative stability in yearly averages.
That’s no longer the case. Pointed gourd (parwal) has fared the worst, averaging ₹140 during FY22-FY24 for every ₹100 you needed to pay during FY15-FY19, followed by radish at ₹136 and carrot at ₹135. Tomato also featured in the top 10.
Vegetable prices typically surge and plunge throughout the year. Prices are driven in part by seasons – usually rising in summers and cooling in winters. But of late, the effects of climate change – in the form of heatwaves and low, uneven or excess rainfall – have caused lengthier surges. This was evident throughout FY24, when uneven rains caused tomato prices to rise before unseasonal rains led to costlier onions.
From negative 8.5% in March 2023, vegetable inflation hit a peak of 37.4% in July before moderating to 2.8% in October and rising again to 28.3% in March 2024.
Climate curse
Volatility in vegetable prices has kept policymakers on their toes, ready to manage the situation whenever it spirals out of control. At the same time, the declines after the surges have done little to reduce overall household budgets. On top of that, the expected seasonal decline typically seen in the winter months didn’t materialise in FY24, putting more pressure on budgets.
“India is among the most climatically vulnerable countries and the weather risks are only mounting," Crisil said in a report last month. “Given the higher susceptibility of vegetables to the weather (heatwaves, floods, storms, changing monsoon patterns and so on), climate change is likely to have a dire impact on vegetable production and prices. Rising temperatures could also exacerbate the pest problem."
The previous financial year saw several adverse weather events including a below-normal monsoon, warmer climate, and unseasonal rains, which kept vegetable prices from falling. However, the current financial year may play out differently if the India Meteorological Department's prediction of a normal monsoon plays out. However, extreme heat is also expected from April to June, which could keep vegetable prices elevated.
Relief ahead?
Vegetable prices are usually higher in summer. Potato prices were 13.4% higher in April than in the previous month, data from the Department of Consumer Affairs showed. Tomato prices were up 2.4%, marking the first monthly rise since November 2023. Onion prices continued to fall for the fifth straight month, but are still about 42% higher than they were last year.
“Vegetable prices in April-June could continue to remain firm amidst the severe heatwave that is going on in the country," said Yuvika Singhal, an economist at QuantEco Research. “We find evidence of prices of perishable items recording a stronger momentum historically in years when maximum temperatures exceed normal averages."
She added that the price pressures could be short-lived as an “above-normal" monsoon is expected this year. “Given the short shelf life of vegetables, price gyrations can be best tackled by creating buffer stocks wherever possible and enhancing cold-storage facilities in the country," Singhal said.
