Food inflation: Meal costs surge on rising vegetable prices, Crisil says

New Delhi: The cost of a vegetarian thali rose 11%, and that of a non-vegetarian thali 6% in July compared with the previous month, rating agency Crisil said on Tuesday.

The surge in the cost of a vegetarian meal is due to rising vegetable prices, particularly of tomatoes, according to the Roti Rice Rate for July, an estimate of the cost of home-cooked meals by Crisil Market Intelligence and Analysis.

The cost of preparing a vegetarian thali in July rose to ₹32.60 from ₹29.60 in June, and that of a non-vegetarian thali to ₹61.40 from ₹58, the report said. Both costs for July 2024 were lower than those for July 2023, when a vegetarian thali cost ₹34.10 and a non-vegetarian thali ₹67.80.

"The average cost of preparing a thali at home is calculated based on input prices prevailing in north, south, east and west India. The monthly change reflects the impact on the common man’s expenditure," the report said.

Also read | Thali costs rise in June led by vegetable, broiler chicken prices, says Crisil

The price of tomatoes rose in July after scanty rainfall across the country led to a sharp cut in supply for the second consecutive year. "7% out of the 11% rise in the cost of the veg thali can be attributed to only tomato prices, which have zoomed 55% on-month from (approximately) ₹42 per kg in June to (approximately) ₹66 per kg in July," Crisil said.

Scattered rain was not the only reason for the lower output of tomatoes. Crisil said tomato crops in key states of Andhra Pradesh and Karnataka were lacklustre due to the heatwave across the country during May this year.

Government intervention and rising costs

Ultimately, the union government had to intervene in the open market and sell tomatoes at a subsidized price in some regions in July. Mint reported on 29 July that the government had launched a subsidy initiative to allow tomatoes to be sold in the retail market for ₹60 per kilogram as prices soared. The price of tomatoes was in the range of ₹80-100 over the last month.

Price fluctuations of other key ingredients in a vegetarian thali also pushed the price of the meal, as per Crisil. Prices of onions and potatoes rose 20% and 16% respectively in July compared with the previous month, further contributing to the higher cost of the veg thali, the Crisil report said.

The cost of a non-vegetarian thali rose at a slower rate than that of a vegetarian thali, as per Crisil, due to the stable price of broiler chickens, which accounts for more than half the cost of a non-vegetarian thali. 

Also read | Vegetarian thali becomes more affordable in February, non-veg thali costlier

The cost of vegetarian and non-vegetarian meals in July has fallen marginally compared with the year-ago period. Incidentally, a fall in the price of broiler meat in July compared with the year-ago period pulled down the cost of a non-vegetarian home-cooked meal.

The rising cost of home-cooked meals shows that inflation in India is fuelled by food price hikes. Food inflation rose 8.4% year-on-year in June, as much as 50 basis points higher than the 7.9% rise in May year-on-year, as per the Reserve Bank of India's 'State of the Economy' report in July this year. 

In terms of sub-groups, inflation edged up in cereals, milk and products, fruits, sugar and prepared meals, the RBI noted in its report. Vegetable prices continued to record a double-digit increase compared with the year-ago period, RBI said in July.

"Food prices are clearly dominating the behaviour of headline inflation and households’ inflation expectations," the RBI report said. "The accumulation of food price pressures threatens the outlook for inflation in the form of spillovers to wages, rents and expectations," the report added.

And read | Thali plates reflect spike in food prices