India's farming input inflation saw marginal dip in last few months

Vegetable prices pushed the retail food inflation to 14.25 per cent in July owing to the high prices of vegetables, with tomato leading the pack, along with pulses, cereals, and even spices.

WPI-based food inflation remained subdued since November last year, but rose in July, higher than the consumer price index inflation at 11.51 per cent.

Analysts and policymakers believe that inflation in some items, mainly vegetables, would come down due to seasonal factors. In contrast, for others, supply-side factors need to be addressed to ensure that their demand is met adequately.

The moot question in this matrix is — Are the farmers benefiting from this price increase? Also, is the price increase structural or transitory?

In the first case, barring the last quarter of the financial year 2022-2023, data shows that terms of trade have been against agriculture. The latest numbers would come only with the first quarter GDP figures, slated to be out on 31 August.

This could also imply that farmers were paying more for availing the services from other sectors than they would have gained from any price rise of items produced by them.

On the second question, data shows that the WPI inflation of most key inputs that go into farming — fertiliser, pesticides, and machinery — have all come down from the highs seen in the last few years, and in some cases like diammonium phosphate (DAP), insecticides, and pesticides have turned negative in the last few months.