Mumbai: Onions are a staple food in India, and their prices have been rising sharply in recent months. In Mumbai, the retail price of onions has reached ₹80 per kilogram, the highest it has been in years. This has caused widespread hardship for consumers, who are already struggling to cope with the high cost of living.
There are a number of factors that have contributed to the rise in onion prices. One is a shortage in supply. Onion production in India fell by 10% in the last year due to unfavorable weather conditions and pests. Another factor is the high demand for onions during the festive season. Onions are an essential ingredient in many Indian dishes, and demand for them typically rises during Diwali and other festivals.
The rising price of onions has had a significant impact on consumers. Many people are now cutting back on their onion consumption, or even eliminating it altogether. This is having a knock-on effect on other businesses in the food industry, such as restaurants and food processors.
With consumer food prices 9.9% higher year-on-year in August and overall retail inflation at 6.8% – well above its target of 4% and upper tolerance limit of 6% – the Reserve Bank of India (RBI) is understandably worried.
That’s apparent from its Monetary Policy Committee’s statement “…the unprecedented food price shocks are impinging on the evolving trajectory of inflation and [the] recurring incidence of such overlapping shocks can impart generalisation and persistence”.
Those worries are shared no less by the Centre, particularly with national elections scheduled six months from now. Consumer food price inflation averaged a mere 0.4% during the 12 months leading to the Lok Sabha polls of April-May 2019. The importance of not allowing it to spiral and translate into generalized inflation ahead of April-May 2024 is obviously not lost on the central government.
A closer look, however, shows food inflation being increasingly driven by two items: Cereals (11.9% in August) and pulses (13%).
While the annual retail price rise in vegetables has been higher, at 37.4% in July and 26.1% in August. The best indicator is tomato, the retail inflation for which stood at a mindboggling 202.1 % in July and 180.3% in August this year. The current all-India modal (most-quoted) retail price of tomato is only Rs 20 per kg, as against Rs 40 a month ago and Rs 130 four months ago.
Meanwhile, for onions, the Indian government has imposed a 40% tax on onions for export as prices of the vegetable spike, driving up retail prices of what is a key food item for many households in the country. Traders revealed that in October prices of quality onions nearly doubled. Possible hoarding could lead to immediate inflation even before the export taxes come into force, while supply concerns could bring prices down again in the future.
However, onions have a bearing on the Indian political environment. Madhya Pradesh Congress Chief Kamal Nath in an interview also took a jibe at current price inflation. “Onion is bringing tears to everyone’s eyes. This is just one thing, what else is not costly”. With this, controlling the price circuit of this teary vegetable is crucial for the upcoming assembly elections.
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