Vegetable prices to stay elevated in coming months due to above-normal temperature forecast: CRISIL

Vegetable price inflation: The volatility in vegetable prices, a significant driver of food inflation in India, is set to continue in the coming months due to above-normal temperatures, according to a report by CRISIL. The report highlights that vegetable inflation in India remains the most volatile component of food inflation, with atypical weather patterns exacerbating the situation.

In fiscal 2024, various factors such as warmer weather, uneven rains, and pest attacks led to higher-than-usual vegetable prices. The vegetable price index not only missed its typical seasonal winter decline but also exceeded the seasonal uptick last year, resulting in a surge in average vegetable inflation.

Vegetable prices are highly sensitive to weather conditions, and India has witnessed disruptions in vegetable supplies due to erratic weather in recent years. While short-term measures like creating buffer stocks and restricting hoarding provide temporary relief, they are not long-term solutions due to the perishable nature of vegetables.

The report suggests that rising intensity and recurrence of weather disturbances highlight the need to mitigate climate risks to vegetable production and prices. Climate change poses a significant threat, with rising temperatures potentially exacerbating the pest problem and impacting vegetable production.

In fiscal 2024, vegetable inflation averaged 14.9 per cent, significantly higher than the 3 per cent recorded in fiscal 2023 and the decadal average of 5.6 per cent. Tomatoes, onions, garlic, and ginger were among the vegetables that experienced substantial price hikes. Despite a typically seasonal pattern, vegetable prices remained elevated for most of the year due to weather-induced supply shocks.

The IMD has predicted an above-normal southwest monsoon in 2024, which is favorable for vegetable prices. However, the distribution of monsoon is crucial, and above-normal temperatures till June could keep vegetable prices elevated in the coming months.

To address the volatility in vegetable prices, the report recommends structural solutions such as improving cold storage facilities, promoting the use of hybrid weather-resistant seeds, and reducing post-harvest losses. These measures could help mitigate the impact of climate change on vegetable production and prices in India.