A seller is arranging onions at a vegetable market in Nagaon district, in the northeastern state of Assam, India, on February 1, 2024.
Nurphoto | Nurphoto | Getty Images
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The big story
A curry without onions would be considered blasphemous by much of India.
So, even a modest change in the price of the bulbous vegetable soon becomes the talking point around dinner tables for hundreds of millions of people in the country.
And it has been for the past year.
The price of raw onions has risen 165% over the past year, according to the Lasalgaon Agriculture Produce Market Committee, which is India’s largest wholesale onion market. Prices have also inflated for other vegetables, such as tomatoes, which now cost nearly twice as much as this time last year.
Poor weather has been behind much of the havoc. The drought last year and the ongoing heatwave, which CNBC has previously reported on, have disrupted the supply of staple foods such as grains and vegetables.
Temperatures in large parts of the country are about 4 to 9 degrees Celsius (7.2 to 16.2 Fahrenheit) above average for this time of the year. The high heat has spoilt large amounts of recently harvested and stored vegetables and is threatening to stop the planting of a fresh batch of crops.
Food prices, which rose an annual 8.7% in both April and May, account for nearly half of the overall consumer price basket. The sharp rise in the cost of food has kept headline inflation above the central bank’s target of 4%, preventing it from cutting interest rates.
“The Indian economy remains hostage to intersecting food price shocks,” Michael Patra, deputy governor of the Reserve Bank of India, said in his statement at the latest monetary policy meeting. “Food prices are holding back any consideration of possible changes in the monetary policy stance,” he added.
Keeping rates elevated, though, appears to be “an unacceptably high growth sacrifice,” according to Jayanth Varma, another member of the central bank’s monetary policy committee, who voted to cut rates. Politically, an economic slowdown is unlikely to bode well for the newly elected BJP-led coalition government.
The anxiety was palpable this week when the government announced limits on traders stockpiling wheat.
“Imposing stock limits was just one option. We have many other tools at our disposal to ensure that wheat prices do not rise abnormally,” food secretary Sanjeev Chopra told reporters and added that there was no shortage of wheat in the country.
The government also has the option to remove import taxes — currently set at 40% on wheat — to hold prices down.
Yet, Prime Minister Narendra Modi is stuck in a bind if he wants to gain favor with the country’s farmers ahead of elections in two large agricultural…