Food inflation surges due to premature rise in temperature, this year inflation rate is 6.8 percent possible – CRISIL

As the summer progressed, the average temperature in northwest and central India reached a 122-year high. The rise in mercury has affected crops like wheat, groundnut, millet and mango.

This year inflation rate is 6.8 percent possible

Image Credit source: PTI

Rating agency Crisil said on Monday that the rise in mercury in the country in early 2022 has been the main domestic reason for the rise in the prices of food items. The agency has projected consumer price index (CPI)-based inflation to be 6.8 per cent in 2022-23, compared to 2021-22, in view of pressure on food prices in the current fiscal. This is slightly higher than the Reserve Bank of India’s (RBI) estimate of 6.7 percent. RBI has been citing the rise in inflation as the main reason for Russia-Ukraine war and consequent rise in commodity prices. The inflation rate has consistently remained above the Reserve Bank’s satisfactory level (2 to 6 percent). At present, the share of food items in the Consumer Price Index is 39 percent.

Prices rise due to impact on supply

Crisil Research said in a report, the main reason for the inflation rate of food articles is lack of supply. The reason for the short supply is the sudden increase in domestic heat with the Russo-Ukraine war. The rating agency said, “We estimate consumer price index based inflation to be 6.8 percent.” This is based on the estimate of food inflation to be at the level of 7 per cent. According to the report, the inflation rate of food items is a major challenge before the Monetary Policy Committee. As the summer progressed, the average temperature in northwest and central India reached a 122-year high. The rise in mercury has affected crops like wheat, groundnut, millet and mango.

Situation worsened due to premature heat stroke

Crisil said, heatwave is the main domestic reason, due to which the prices of food items have increased this year. This points to a 2020 RBI study. It said the macroeconomic impact of climate change on food inflation has been statistically significant for India over the past two decades.