Soaring Onion Prices May Hurt PM Modi More Than Tomatoes
The government of prime minister Narendra Modi is more at risk from rising onion prices in india than it is from a recent 700% increase in tomato prices, necessitating new measures to control food inflation before important elections.
India aims to sell onions locally at discounts and has placed a 40% export tax on them. Along with tomatoes and potatoes, the vegetable forms a triumvirate of foods so essential to indian diets that price rises caused by crop losses in the past have stopped some ruling parties from regaining power. customers are more sensitive to onions than to tomatoes and potatoes, a vegetable that is difficult to substitute with any other food in many regional cuisines.
After torrential rains in important agricultural regions caused tomato prices to soar by as much as eightfold, the government came under harsh fire. Although tomato prices have been declining, a continuous increase in onion prices has the authorities on high alert. The decisions are being made as prices for several agricultural products, including wheat and rice, climb due to unfavorable weather.
For Modi, who will run in the national elections for a third five-year term, stable food prices are essential. A 15-month high in retail inflation highlights the scope of the problem. The government has reduced wheat, rice, and sugar exports and is considering eliminating a 40% tariff on wheat imports. It has reduced crop storage and is openly selling grains and tomatoes.
India aims to sell onions locally at discounts and has placed a 40% export tax on them. Along with tomatoes and potatoes, the vegetable forms a triumvirate of foods so essential to indian diets that price rises caused by crop losses in the past have stopped some ruling parties from regaining power. customers are more sensitive to onions than to tomatoes and potatoes, a vegetable that is difficult to substitute with any other food in many regional cuisines.
After torrential rains in important agricultural regions caused tomato prices to soar by as much as eightfold, the government came under harsh fire. Although tomato prices have been declining, a continuous increase in onion prices has the authorities on high alert. The decisions are being made as prices for several agricultural products, including wheat and rice, climb due to unfavorable weather.
For Modi, who will run in the national elections for a third five-year term, stable food prices are essential. A 15-month high in retail inflation highlights the scope of the problem. The government has reduced wheat, rice, and sugar exports and is considering eliminating a 40% tariff on wheat imports. It has reduced crop storage and is openly selling grains and tomatoes.
According to rahul Bajoria, an economist with Barclays bank Plc, "the government's move on onions is preemptive in nature, as the price rise appears to be in line with seasonal trends for the time being." "But with expectations of an erratic end to the monsoon season," he continued, "the government is focusing on the risk of food prices remaining elevated in the coming months."
El Niño Threat
El Niño Threat
An El Niño-induced spell of poor weather may hurt onion crops in the top growing state of Maharashtra, where precipitation is already below average. Monsoon rains overall in india have been about 7% below normal, helping push up food prices. Wheat has risen 12% in delhi from a year earlier. Rice costs 22% more, tomatoes are up 80%, while onions have increased 32%.
On his six acres of property in Maharashtra, amar Kisan Jagtap, 44, farms maize and onions, although he didn't plant onions during the monsoon. In preparation for several state elections this year and the general election in april or May of 2024, Jagtap aims to cut the onion area in half over the winter months.
In an interview, Jagtap stated, "I will reduce plantings as my costs are rising every year, but we're not able to get remunerative prices." "Government intervention in the onion market is very high, and the recent decision to impose an export duty will pressure prices."
With more than 40% of total production going to Maharashtra, onions are the nation's top crop. Three times a year, twice during the rainy season and once in the winter, they are grown. In certain areas of the state, rainfall has been 18% below average, affecting crops and worrying the authorities ahead of election day.
Elections are clearly a priority, according to Bajoria. According to him, the majority of the increase in food prices in July was caused by perishable and seasonal crops. "I'd be more worried about sticky commodities like rice and wheat," the author said.
In an interview, Jagtap stated, "I will reduce plantings as my costs are rising every year, but we're not able to get remunerative prices." "Government intervention in the onion market is very high, and the recent decision to impose an export duty will pressure prices."
With more than 40% of total production going to Maharashtra, onions are the nation's top crop. Three times a year, twice during the rainy season and once in the winter, they are grown. In certain areas of the state, rainfall has been 18% below average, affecting crops and worrying the authorities ahead of election day.
Elections are clearly a priority, according to Bajoria. According to him, the majority of the increase in food prices in July was caused by perishable and seasonal crops. "I'd be more worried about sticky commodities like rice and wheat," the author said.