Vegetable prices up 36% YoY, as food inflation zooms; Q2 numbers worsen consumption slowdown

For almost over a month now, vegetable prices, specifically the prices of tomato, and onion have been hovering over ₹100 – ₹120 a kg and ₹60 a kg, respectively in markets across the country. Cost of the majority of other green vegetables are hovering at the higher end of ₹60 – 80 a kg price band. High prices of cereals, pulses and fruits are also stoking the inflationary fire, data from the government reveals.

Propelled by the food price inflation, retail inflation, which remained at a benign sub 4% level in July and August, has started taking a toll on the pockets of the consumers.

“Year-on-year inflation rate based on All India Consumer Price Index (CPI) for the month of September 2024 is 5.49%,” said the ministry of statistics and programme implementation in a release on October 14. It is a significant jump month on month from the retail inflation rate of 3.65% in August. Food inflation rate, meanwhile, has jumped to 9.24% in September this year compared with 6.62% in September last year.

Consumers Bear the Brunt

Vegetable prices are taking a major toll on the common man. Data from the ministry of statistics and programme implementation reveals that vegetable prices in the urban segment have gone up by a whopping 35.88% year on year (YoY) in September this year. Strangely, vegetable prices in the rural segment have fared even worse, zooming a notch higher than the urban sector at 36.04% YoY in the month.

Vegetables are not the only bane to the common man’s pocket, which is equally getting pilloried by the rising prices of pulses, cereals and fruits, data reveals. According to the ministry of statistics, the prices of pulses have gone up by 9.8% YoY in the urban centres and 9.79% in the rural segment in the month of September. Similarly, prices of the cereals are up 7.11% in the rural areas and 6.34% in the urban areas. Fruit prices are up 8.35% in rural segments, and 6.79% in urban areas in September this year.

It may be noted that the average retail inflation rate in the last thirteen months hovers at around 4.89%, which is higher than RBI’s projection of 4.4% for the quarter. Also, the average food inflation in the last thirteen months stands at 8%.

Q2 number reveals stress

It is no wonder that the impact on consumption is visible in the quarterly results of consumption theme companies. Tepid numbers in the initial results by the companies in the consumption sector may point to a dull festive season. Quarterly results for July-September by Reliance (Reliance Retail), D-Mart, Bajaj Auto, Havells, and Nestle indicate stress in consumption in the economy. Reliance Retail revenue declined to ₹76,325 crore in the quarter, compared with ₹77,163 crore in Q2, FY24. Bajaj Auto, meanwhile, remains cautious in its outlook on the festive season demand. The company, which reported a 31.4 per cent dip in profit after tax to ₹1,385 crore in Q2, FY25, pointed to the industry volumes rising a mere 1% to 2% as compared to last year.

Meanwhile, officials in the ministry of finance and the economic policy watchers agree that the current spike may lead to a deferment in the rate cut. Stubborn inflation, especially at a time when the economy is eagerly waiting for a rate cut is one of the last things one would have anticipated.