Wholesale food prices: A reversal?

• HDFC
• 05 Nov 2018
• Knowledge Centre

HDFC, Tester

Price trends in food prices, as measured by the Wholesale Price Index (WPI), remained in the negative zone in Sept-18 for the third consecutive month. Prices of major kharif pulses, along with vegetables and fruits, witnessed a sharp dip during the month, as compared to the same month in the previous year, according to a financial daily’s report.

 

The report states that there might be an uptick in food prices, turning WPI trends from deflation to inflation. The rate of WPI-based deflation in food articles came down from 4.04% year-on-year in Aug-18 to 0.21% in Sept-18. This was mainly on account of an upward movement in vegetable and fruit prices in these two months.

Deflation in vegetable prices narrowed to 3.83% from 20.18% in Aug-18, while that on fruit prices declined to 7.35% in Sep-18 from 16.4% in the previous month. The deflation rate in pulses widened to 18.14% in Sep-18 from 14.26% in Aug-18.

 

The prices of most kharif pulses, along with oilseeds and cereals, are much below their minimum support price (MSP) for the 2018-19 kharif season. Clearly, the deflation rate in fruit and vegetables is narrowing, while the rate in pulses is not showing much change. A growing number of experts and market watchers and economists feel that WPI-based inflation in food articles might now show an upward movement. However, the rate and duration of the inflation rate remain unclear, according to the report.

 

The article stated that according to experts, any rise in WPI will also depend on the Government’s expanded procurement of non-wheat and rice commodities under Prime Minister Annadata Aay SanraksHan Abhiyan (PM-ASHAA).

 

The Centre’s latest guidelines on the scheme do not provide for a support of more than 25% of the total production under all three components — the Price Support Scheme, Price Deficiency Payment Scheme (PDPS), and pilots on the involvement of private sector in procurement.