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Inflation in prices of pulses sharpest in a decade: Crisil -Sayantan Bera
-Livemint.com

Supply constraints due to lower output, higher demand on increasing incomes behind spike in prices, says report

New Delhi: Inflation has come down sharply this year alongside a softening in food prices, but the rise in the prices of pulses—the second most important part of the Indian diet after cereals—has been the sharpest in a decade, Crisil Research said in a report on Monday.

Retail and wholesale inflation were at 42% and 53% for pulses, respectively, in October, while overall food inflation so far this fiscal is down to 4.1%, compared with 7.6% in the same period last fiscal, the report said.

While in the last decade (2004-05 to 2014-15), overall wholesale inflation fell to 6.3%, for pulses it was much higher—9.4% on average.

Such high inflation in pulses is undesirable in a country where an average Indian spends nearly 5% of his food expenditure on pulses, it pointed out.

Supply constraints due to lower production and higher demand due to rising incomes have contributed to the spike in prices.

“Three consecutive monsoon shocks—deficient south-west monsoons in 2014 and 2015 affecting the kharif season output, and weather disturbances in March 2015 affecting the rabi output—have hurt overall pulses production,” the report said. “Global pulse prices are elevated and the rupee is weak, suggesting that resorting to imports could provide limited comfort to domestic prices.”

The rising prices of pulses—especially of arhar or pigeon pea, that crossed Rs.200 per kg last month—caused much heartburn for the consumer as well as the government. The centre asked states to crack down on hoarders and till last week, 12,506 raids were conducted across the country and 133,828 tonnes of pulses seized.

However, arhar is still retailing at Rs.166 per kg in Delhi, showed data from the ministry of consumer affairs. Other varieties such as moong and urad are also selling on the higher side, at Rs.112 and Rs.152 per kg, respectively, while gram is retailing at Rs.75 per kg, data showed.

Data for the past decade shows a clear pattern of spikes in pulses inflation every third year, Crisil said in its report, adding that the peak this year is higher than the previous two peaks, with wholesale inflation crossing 34% so far.

This year’s spike is primarily due to lower production on account of deficient as well as untimely rains since last year, along with higher global prices, the report said.

It added that farmers are unwilling to grow pulses due to production and price risks, and also low and declining profitability. “A high fluctuation in prices has meant that farmers are seldom sure of getting stable returns. This may have led to large-scale substitution of area under pulses cultivation with other high-value crops that give comparatively higher returns,” the report said. “Pulses are highly risk-prone because most of the production is rain-dependent. Barely 16% of total pulses area is covered by irrigation and, hence, the crop is highly vulnerable to monsoon shocks.”

The centre’s focus on dehoarding is a welcome step to stem the price rise in pulses in the short term, said Sudhir Panwar, a farmer leader from Uttar Pradesh and member, state planning commission. However, Panwar said, as a long term measure, the government should ensure remunerative prices and income for farmers.

This could be through a robust crop insurance scheme which will mitigate the risks of growing a weather sensitive crop like pulses and by procuring at remunerative support prices, he said.