ALBAWABA – A widespread cereal shortage in India has scourged the country, on top of everything else driving inflation in the Asian subcontinent, Bloomberg reported Tuesday.
This cereal shortage in India can further fuel skyrocketing inflation, HSBC Holdings Plc warned, according to the New York-based news agency. Even as vegetable price shocks are set to ease in the coming months.
“Although concerns about rising food prices are warranted, the real problem is not with tomatoes, but elsewhere,” economists Pranjul Bhandari and Aayushi Chaudhary wrote in a report.
The worry over cereals, including rice and wheat, are “legitimate” and may push prices higher, the report said.
HSBC has retained its inflation forecast of 5 percent for the year ending March 2024 but sees higher risks if cereal inflation takes off.
“Rain distribution and rice sowing data over the next few weeks will be critical,” the economists said.
Furthermore, tepid sowing in northwest India and insufficient rainfall south and east of the country could hurt the rice crop and slow shipments for the world’s largest rice exporter, India, the economists said. This means there could be global price implications for wheat, which is a part-substitute for rice, they added.
According to Bloomberg, cereals make up nearly 10 percent of the consumer price index basket and are a staple in Indian diets.
Surging food prices pushed retail inflation to a three-month high of 4.81 percent in June, prompting economists to raise their price hikes forecasts for the year. This may see the central bank holding rates for an extended period.
Containing price pressures is also crucial for Prime Minister Narendra Modi, who faces national elections next year.
Last week, the government banned exports of cheaper, non-basmati white rice to rein in domestic prices.
Weaker monsoon rains in some parts of India and floods in other areas contributed to soaring prices of vegetables and pulses, the news agency reported.
A jump of more than 400 percent in the cost of tomatoes since the start of the year along with volatile prices of onions and potatoes — key ingredients in an Indian meal — bolstered inflation pressures.
“Tomatoes are a short-cycle crop and price rises tend to reverse in two months,” the economists said. The hikes in prices of pulses, sugar and oilseeds were also potentially manageable, they added.
