Onions Prices Push up Food Price

Record onion prices and the soaring cost of rice and coriander are frustrating Reserve Bank of India Governor Raghuram Rajan’s battle to curb inflation while supporting growth in Asia’s third-largest economy.

The wholesale-price index for onions, a staple food for India’s 1.24 billion people, has climbed 155 percent this year, hitting an all-time high of 820.5 in September, according to the Ministry of Commerce and Industry. The index, set at 100 in 2004, has almost quadrupled in 12 months. A broader measure for food is up 19 percent in 2013, while spot prices for coriander climbed about 29 percent and basmati rice advanced 40 percent.

The RBI has said that it faces an “unenviable task” of trying to address the slowest economic expansion in a decade while tackling the fastest price gains among the largest emerging markets. Local newspapers have reported scuffles at vegetable markets in eastern India and food inflation is set to dominate state elections being held through Dec. 4. High onion prices were cited for the Bharatiya Janata Party losing a 1998 vote in New Delhi.

Food articles, including fruits, vegetables, milk and eggs, accounted for 47 percent of the increase in the benchmark inflation gauge, the wholesale price index. The measure rose 7 percent in October from a year earlier.

Currency Impact

Food prices climbed 18.2 percent in October from a year earlier, down from 18.4 percent in September, the Nov. 14 report showed. Fuel and power increased 10.3 percent. So-called core inflation accelerated as a weaker currency impacted manufacturers, according to HSBC.

India’s rupee is the third-worst performing Asian currency versus the U.S. dollar this year, down 12 percent. It climbed 0.3 percent to 62.2475 in Mumbai on 18 November.

Rain Damage

Prices for onions have already come down in the growing areas of Maharashtra state, India’s largest producer, according to C.B. Holkar, a director at the National Agricultural Cooperative Marketing Federation of India Ltd. High prices have encouraged farmers to plant more onions for their late summer crop after heavy rains in September cut production by as much as 50 percent of the usual 850,000 metric-ton output in the state, he said.