Fall in Kharif output may support elevated rice prices

19 Sept 2022 , 10:25 AM

Due to a shortfall in rice output that can be attributed to a decrease in paddy sowing area, rice prices are likely to stay high for a little longer.

The inflationary pressures already present in the economy have been exacerbated by the price increase factor.

Recent increases in food costs, notably those of cereals, caused retail inflation to soar to 7%. Retail inflation reversed a three-month falling trend in August as a result of the increase.

Similar to this, the wholesale price inflation, which fell to an 11-month low, also revealed price pressures from cereals as a result of the country's wheat crop being negatively impacted by extreme heat waves in several regions.

Additionally, experts and analysts believe that the anticipation of a lower paddy crop - which is higher if external experts are to be believed rather than the conservative government projections - will maintain higher inflationary expectations.

Unpredictable rainfall from June to September and a delayed end to the South-West monsoon rains have raised more questions about the paddy crop.

The production of rice in India for the 2021—22 crop year, which concluded in June, reached a record 130.29 million tonnes (MT), up from 124.37 MT the year before. This year's Kharif season, which produces 85% of all the rice produced in the nation, is expected to see a drop in production of 6-7 MT of rice.

Some, however, contend that there is now no need for concern and that India's buffer stock is sufficient to meet demand.

Additionally, government involvement in the form of a restriction on broken rice export and a 20% levy on the export of non-basmati and non-par boiled rice will aid in keeping the issue under control.

Wholesale prices increased by 10.7% to Rs3,357.2 per quintal as of September 14 from Rs3,047.32 per quintal a year earlier, according to data kept by the Consumer Affairs ministry. From Rs34.85 per kg to Rs38.15 per kg, the retail prices increased by 9.47%.

There is "a revival of food price pressures, principally emanating from grains even as gasoline and core components provided a slight degree of respite," according to an article in the most recent RBI bulletin.

According to the most recent CPI data, rice inflation in August was 6.94%, compared to a negative 1.2% in the same month last year.

The last few years have seen record-breaking rice output and procurement, which has resulted in massive buffer stockpiles and exports.

In contrast to the norm of 13.5 MT, the buffer stock of rice was 47 MT, comprising rice equivalent to unmilled paddy as of July 1.

Due to the deficiency monsoon in various states this year, the paddy scenario has shifted.

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