Heavy rains in the three months to November 2019 may have caused heavy damage to the standing Kharif crop but the same is being considered as a boon for the next crop season. Rains have helped to recharge groundwater aquifers, and filled the major irrigation reservoirs to near full capacity, proving beneficial to the rabi crop. This advantage is likely to bring down the food prices by the March-end, reported by The Indian Express. The data showed there has been 8 per cent more area sown and this coupled with the improved soil moisture conditions and a normal winter, is expected to translate into a bumper harvest, offsetting any Kharif losses and cutting the food prices.
At present, the food inflation rate is 14.12 per cent, which is more than a six-year high. Since the overall retail inflation has 45.86 per cent of food articles, the overall retail inflation rate has also shot up much more than the RBI's benchmark of 6 per cent. Three commodities viz garlic, onion, and potato (GOP) have especially catalysed the food prices. An SBI report said if these commodities are isolated, the headline inflation rate will drop to 4.48 per cent.
High prices of vegetables have majorly hit the inflation rate, however, being mostly seasonal and short-duration crops, the vegetable prices are expected to fall in the coming months. One major factor that can still keep the customers paying more for the food articles is a turbulence in the global prices as the FAO's benchmark index in 2019 was 12.5 per cent higher than in the previous year. This also reflected in a hardening trend in the international prices of food items.
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Meanwhile, from the farmers' perspective, food inflation is not bad news as the recovery in the prices would give a boost to rural incomes, which is beneficial for consumption and overall economic growth in the current circumstances. However, high food inflation will be unavoidable for the government and RBI because that may hurt consumers and make further cuts in interest rates impossible.