SBI report cautions food price rise over possible crop loss due to excess rains

New Delhi [India], August 5 (ANI): With monsoon progressing satisfactorily with a 2 per cent surplus to date and progress of area under Kharif crop cultivation showing 2.9 per cent on a yearly basis, SBI Research expects inflation to remain within the RBI target in 2024-25.

With La Nina getting precedence going ahead, excess rainfalls could result in crop loss and thus a negative impact on food prices, SBI Research report, authored by Soumya Kanti Ghosh, Group Chief Economic Advisor, said.

Theoretically, La Nina brings cooler temperatures and a general increase in rainfall in a region.

For the whole of 2024-25, retail inflation is likely to average 4.6-4.7 per cent. In June, it breached 5 per cent.

Consequently, the cumulative kharif sowing stood at 905 lakh hectares (as of August 02, 2024), 82 per cent of the full season normal acreage and 3 per cent higher than the corresponding date of the previous year.

However, certain major foodgrain-producing states are still in huge deficit mode.

Going forward, IMD’s forecast of above-normal rainfall augurs well for replenishment of reservoir levels and further progress of kharif sowing, said the SBI Research report.

Farmers in India have sown Kharif crops across 904.60 lakh hectares so far this year, as against 879.22 lakh hectares in the same period of last year, according to the latest data from the Agriculture Ministry.

Commodity-wise, paddy, pulses, oilseeds, millets, and sugarcane sowing have been higher year-on-year. Sowing for cotton and jute/mesta has, on the other side, declined.

India has three cropping seasons — Summer, Kharif, and Rabi. Crops that are sown during October and November and the produce harvested from January depending on maturity are Rabi. Crops sown during June-July and dependent on monsoon rains are harvested in October-November are kharif. Crops produced between Rabi and Kharif are Summer crops.

India receives over 70 per cent of its overall rainfall during this southwest monsoon period. Thus, the timely and proper occurrence of monsoon rainfall holds prominence for the Indian economy, given the livelihood of nearly 45 per cent of India’s population depends on agriculture which depends on rainfall.

Rising food prices continued to be a headache for Indian consumers, with the inflation rate in the food segment almost doubling year-on-year in June. Food inflation almost doubled to 8.36 per cent last month, versus 4.63 per cent reported in the same month of 2023, official data showed.

The retail inflation for all segments of food–cement and products, meat and fish, egg, milk and products, oils and fats, fruits, vegetables in particular, pulses and products, sugar, spices, prepared snacks, and sweets–rose month-on-month.

India’s overall retail inflation rate hardened in June, taking a departure from the moderation it witnessed in the past few months, pushed by rising food prices.

Retail inflation data for July will be released early next week.