Hyderabad: India is staring at a prolonged period of food inflation as inadequate monsoon rainfall, declining water availability and the threat of El Niño raise concerns over agricultural output. Farmers, especially in the southern and western parts of the country, are facing difficulties preparing for the winter cropping season because of insufficient moisture in the soil.
The impact is already being felt across food markets, with prices of essential commodities such as sugar, pulses, wheat, rice, onions, milk and poultry products witnessing an increase. India Ratings and Research estimates that food inflation could touch around 10% in the October-December quarter.
The rising cost of animal feed, transportation, packaging and energy is further adding to the price burden on protein-rich food products, including chicken, milk and eggs. In the poultry sector, corn and soybean together account for nearly 60-70% of production costs, putting additional pressure on producers.
Chicken prices could see another increase from January as production expenses climb and supplies become tighter. Economists have cautioned that a prolonged rise in protein prices could hit low-income households particularly hard, potentially compelling families to cut down on nutritious food consumption.
The pressure on food prices is also being compounded by restricted sugar production, elevated international commodity prices, a depreciating rupee and higher freight charges.
While India has surplus stocks of rice and wheat, the availability of preferred varieties of these grains remains constrained in certain regions. Economists have warned that sustained food inflation could affect household spending and add to the pressure on the Reserve Bank of India to increase interest rates.
The direction of food prices in the coming months will largely depend on winter crop output and weather conditions.