Erratic Rainfall May Impact Vegetable Prices In India, Says CareEdge

Unpredictable monsoon patterns across India could lead to a spike in vegetable prices, according to a report by CareEdge. Despite an overall above-normal monsoon, regional disparities in rainfall have been significant, with key agrarian regions facing deficits. This uneven rainfall distribution, combined with episodes of flooding in some areas and dry spells in others, threatens to disrupt vegetable production, potentially driving up food prices in the coming months.

The report notes that while the monsoon was 6.6 per cent above normal in August, nearly 42 per cent of India’s 36 meteorological subdivisions experienced rainfall deficits. Key agrarian states such as Punjab, Bihar, Haryana, and Uttar Pradesh saw significant rainfall shortfalls, with deficits ranging from 10 to 33 per cent. These shortfalls are expected to hinder vegetable production in these regions, contributing to price hikes.

Vegetables have a 13 per cent weight in India's food basket, and inflation in this category has averaged 25 per cent over the last six months. The sequential momentum of staple vegetable prices—including potatoes, tomatoes, and onions—remains high, averaging more than 20 per cent month-on-month. With the early arrival of the festive season this year, demand for vegetables is expected to rise further, adding pressure on prices.

The erratic monsoon has also led to uneven reservoir levels across the country. While reservoir levels are at 72 per cent of full capacity nationwide, northern India lags with just 53 per cent capacity, compared to 84 per cent last year. This could impact irrigation for the upcoming rabi season, further straining vegetable supply.

CareEdge suggests that the adverse base effect of food inflation is expected to play out in the next two months, potentially slowing any moderation in food prices. Food inflation is projected to average 6.9 per cent in Q2 FY25 and 7.5 per cent in Q3 FY25 before easing to 5.3 per cent in Q4 FY25, assuming a strong rabi harvest.

As erratic rainfall and rising demand coincide, closely monitoring vegetable prices will be essential to managing inflation expectations and mitigating the impact on household budgets.