FOCUS: CPI inflation softens but pulses prices still a challenge
Informist, Thursday, Sep 14, 2023
Abhijit Doshi and Arunima Bharadwaj
MUMBAI/NEW DELHI – The softening in retail price inflation in August might have given a degree of comfort to the policymakers, but the continued rise in prices of pulses is bound to pose a challenge. The unfavourable climatic conditions and the resultant irregular rainfall in various pulses growing regions have taken a toll on the output of pulses, pushing up their prices.
The annual inflation rate based on the Consumer Price Index eased to 6.83% in August from 7.44% a month ago, staying above the Reserve Bank of India's medium-term inflation target range of 2-6% for the second consecutive month.
While the food price index declined by 0.7% on month in August, prices of pulses rose by 1.5%. Inflation in pulses and products was at 13.0% in August, staying in double-digits for the third consecutive month.
India is the largest producer and consumer of pulses in the world. According to a NITI Ayog study, India's consumption of pulses in 2020-21 was estimated at 26.1 mln tn compared with the production of 24.5 mln tn, leaving a gap.
The rabi season (October to February) last year was affected first by severe heat and then by unseasonal rains. The kharif season (June to October) this year has also been highly erratic, with heavy rains in July followed by a dry August. The rabi or winter season accounts for about two-thirds and the kharif season for one-third of the total pulses production in the country.
As a result, the output of pulses has remained inadequate to meet demand at reasonable prices. According to the agriculture ministry's third advance estimates of foodgrains production, pulses output in 2022-23 (Jul-Jun) is projected at 27.5 mln tn, up 0.7% from 27.3 mln tn in the previous year. However, the arrival and price of pulses have put a question mark on these figures.
The all-India average retail prices of tur, the main kharif pulse crop, have risen to 144 rupees per kg, up 29% since January, according to data from the Department of Consumer Affairs. Tur prices in the retail markets are up 4% on month currently.
Similarly, chana prices in the retail markets are showing a rising trend and are currently being sold at 79.56 rupees per kg, up 4% from August, data from the department showed.
Even though the government has pegged the output of tur in 2022-23 at 3.4 mln tn, down 18.7% on year, the industry estimates it to be much lower at 2.5 mln tn. Similarly, the industry sees chana output at 9.0 mln tn, sharply lower than the government estimate of 13.5 mln tn.
Kharif acreage data also indicates an uncomfortable position. According to the latest government data, the total acreage under kharif crops, which was lagging behind last year’s level, seems to have caught up and was at 108.9 mln ha as of Friday, almost the same as 108.8 mln ha a year ago. But the acreage of pulses at 11.9 mln ha is 9% lower than last year’s level of 13.1 mln ha. As of Friday, the area under tur and urad, the two main kharif pulses crops, were down 14% and 8% on year, respectively.
It may look strange that despite rising prices of pulses, their acreage has not increased. Apparently, farmers are looking at more remunerative, and perhaps more sturdy crops. “Sowing of pulses has taken a hit this season because erratic rainfall in key growing regions made farmers shift to other remunerative crops such as soybean and small millets in hope of better returns,” according to a research report by Geojit Financial Services.
The area under soybean and small millets as of Friday were up 1% and 6% on year, respectively.
“The area under pulses especially for tur has not increased mainly because of late monsoon. By the time monsoon hit the key growing regions of tur like Maharashtra, sowing phase had already ended,” said Rahul Chauhan, director of IGrain, a commodity research company.
The southwest monsoon hit Mumbai, the capital of Maharashtra, on Jun 25, two weeks behind its normal date.
With the monsoon season nearing its end, not many are hopeful of the output of pulses increasing or their prices coming down, particularly just ahead of festival season.
The India Meteorological Department has forecast monsoon rainfall in September to be normal at 91-109% of the long-period average. Even if the rainfall is normal in September, the output of pulses may not recover, as the erratic climate has affected yields, according to various media reports.
Moreover, the September rains have so far been confined to some regions, whereas some pulses growing regions like Rajasthan are facing extreme heat, damaging or even destroying crops.
“Productivity of moong crop is also likely to be affected in Karnataka due to delayed monsoon and uneven distribution of rains in the later months,” Chauhan said.
In the past few months, the government has taken several measures to improve the supply of pulses in the domestic market, such as cutting import duties, imposing stock limits, releasing pulses by government agencies like the National Agricultural Cooperative Marketing Federation of India in the open market, and signing of memoranda of understanding with some countries for import of pulses. However, these measures do not seem to have yielded results so far.
Going ahead, the government may not have many weapons in its armoury, according to Biren Vakil, chief executive officer of Paradigm Commodity Advisors. The stocks with government agencies are dwindling, while the procurement does not hold much hope, given the lower output. Imports on a large scale also seem doubtful, given that many of the pulses growing countries are in a similar situation, he said. For instance, the lentil crop in Canada is down 30% due to erratic climate.
“The government has exhausted its weapons and now does not have many tools to address the problem,” Vakil said. According to him, even the trade does not have much stocks of pulses at this juncture.
Yet another problem is the recent spread of plant diseases. “The abnormally high temperature this year has given rise to plant diseases such as black fungus. This is a worldwide situation and has started impacting crops this year. Unfortunately, not many governments have taken note of it,” Vakil said.
In the medium term, the precarious situation could lead to lower protein consumption by people in the lower strata of society. In India, protein is mainly derived from pulses, animal products, and milk. While mutton and chicken are good sources of protein and are currently in good supply, religious beliefs and sentiments prevent many people from consuming them. Milk prices have risen and may rise further because of inadequate availability of animal fodder. So pulses have remained the major sources of protein, but rising prices may be putting them beyond the means of the poor. Is India heading towards a protein crisis?