Amid agri unrest, May retail inflation at another low of 2.18%

Food prices entered a deflationary zone in May, with Consumer Food Price Index at minus 1.05%

Retail inflation for the month of May hit another series-low, coming down to 2.18 per cent. Consumer Price Index-based inflation was 2.99 per cent in April and 5.76 per cent in May last year.

Food prices entered a deflationary zone in May, with the Consumer Food Price Index at minus 1.05 per cent, against 0.61 per cent this April and 7.47 per cent in May last year, official data showed on Monday.

The headline figure of 2.18 per cent is the lowest since the series was introduced with a new base year in January 2015. This is a second month that retail inflation has hit a series-low. “The decrease can be ascribed to a decline in food prices, owing to falls in the price of cereals, fruit, egg, fish, meat, sugar and spices,” said Madan Sabnavis, chief economist at CARE Ratings. The steepest fall was in pulses, at minus 19.45 per cent, and vegetables at minus 13.44 per cent. The food and beverage category, 46 per cent of the CPI index, showed minus 0.22 per cent for May.

For farmers, the record low means the produce is not fetching even their basic price in the market. Their spreading agitation has been fuelled by the fact that market rates of major pulses and vegetables have slumped in recent years. According to data provided by the Department of Consumer Affairs, the retail price of urad dal (black gram) is 37.6 per cent less than last year, while masoor dal (red lentil) is 13.7 per cent less. And, below the minimum support price set by the Centre. Though the Centre has stepped in to purchase pulses at market rates from farmers, this is concentrated in a few states and the total purchase has been less than a tenth of the production in 2016-17.

Among vegetables, potatoes are selling at 31.1 per cent less than last year in most retail markets; onion is 4.3 per cent weaker. Tomatoes are 45.2 per cent cheaper. “DAP (fertiliser) has gone up from Rs 1,000 a bag to Rs 2,300 in one year. How are we to make ends meet?” asks Anil Thakur, a farmer from MP’s Mandsaur. 

Sabnavis said while food prices had come down, core inflation “continues to be sticky in the upward direction”. He said food prices could turn around in June and there could be upside risks to inflation. “The Reserve Bank is expected to maintain status quo (on lending rates) until September, as inflation is dependent upon turnaround of the monsoon, increase in house rent allowances, implementation of GST and farm loan waivers. We expect only a 25-basis point cut in October,” he said. 

On June 7, the central bank’s Monetary Policy Committee held interest rates where they were for a fourth consecutive time. This drew flak from the finance ministry, with Chief Economic Advisor Arvind Subramanian saying the panel’s inflation model was faulty.