High-priced pulses pushed off lndia menu

The spike in food prices, especially lentils, is hurting poorer Indian households. A crackdown on traders who hoard the staple has eased pressure but farmers need support to recover from the last harvest.

Due to high prices of some basic food items in India, many customers are avoiding buying the more expensive varieties. Adeel Halim / Bloomberg

For Shohba Chauhan, a housemaid in Mumbai, making some of her family’s favourite Indian dishes, including idli, has not been an option recently because of a surge in the price of pulses.

“It’s too expensive,” she says. “We just have to go without.”

Food inflation has become a critical issue in India. Official data released on Tuesday showed that surging food costs led retail inflation in the country last month to accelerate to its fastest in 15 months. Consumer prices increased by 5.6 per cent compared to a year earlier. Within the consumer price index, food prices jumped 6.4 per cent in December from a year ago, driven by a 46 per cent surge in the price of pulses, including lentils.

This followed a 5.4 per cent rise in consumer prices in November from the previous year and a 6 per cent rise in the consumer food price index.

The spike in the prices of pulses has been blamed on insufficient monsoon rains and delays to the sowing of the winter crop, which have reduced supply. But hoarding of supplies by some traders to artificially drive up rates are also widely considered to be a factor in the surge in prices.

Pulses are a staple of the Indian diet and any rise in costs hits the poor particularly hard.

Dinesh, who says he only goes by one name, works in the Mahavir Provisions Store in Colaba market in south Mumbai. He points to bags of dal [lentils] that are stacked high and says many customers are avoiding buying the more expensive varieties, including toor and urad dal because prices are too high. The shop is selling toor dal at 180 rupees (Dh9.75) per kilogram, with urad dal priced at the same rate.

He picks out some bags of chana dal which are selling for 90 rupees a kilogram.

“These ones, people are running with them because the prices are lower,” Dinesh says. “But the others are selling less now because they cost too much. The supply is less, so the prices go up. There’s nothing we can do.”

The market worker adds that he cannot afford to buy many of the pulses at their current prices and looks for cheaper alternatives or buys them in smaller quantities.

State governments have seized more than 130,000 tonnes of pulses from hoarders following a series of raids. The majority of the seizures have since been released into the retail market to help reduce prices, a report by the Press Trust of India news agency revealed.

“The impact of sharp increases in food prices on overall inflation, will be a key monitorable in the coming months,” according to Crisil Research, which is part of Standard & Poor’s.

Inflation has come down sharply compared to the double-digit rises India was experiencing a couple of years ago, but December was the fifth consecutive month that consumer price inflation edged higher.

“The rise was much slower than in the previous months as the low base effect wore out,” says Crisil.

“Pulses inflation stabilised at a higher level after rising sharply for nearly a year. This month, higher inflation was driven by a near 40 basis points jump in food inflation – mainly sugar, meat, fish and vegetables – and higher fuel inflation, led by the hike in excise duty last month.”

It expects the consumer price index inflation to average 5.4 per cent in the current financial year, which runs until the end of March. The Reserve Bank of India (RBI) has set an inflation target of 6 per cent by the end of this month, “which looks attainable”, it says.

Edelweiss, a financial services group based in Mumbai, says that “sugar and edible oils inflation increased owing to international food prices, while the anticipated decline in pulses prices has not occurred”, although it believes high pulse rates should subside. “However, if the recent rising trends in sugar and edible oils prices persist, it could push inflation higher.”

Kamlesh Barot, the director of Vie Hospitality in Mumbai and the former president of the Federation of Hotel and Restaurant Associations of India, says the fact the government has intervened by cracking down on hoarders is helping prices to ease.

“The new crops that will be coming in a month or two will also put prices down,” he says.

But he explains that sharp fluctuations in food rates pose challenges for restaurant owners.

“The menu prices that the restaurant industry charge are not as flexible, like the room rates in a hotel,” says Mr Barot. “Restaurants are not able to negotiate those prices because they are printed on the menu and it’s hardly possible for these kind of inflationary trends to revise the menus now and then because there are a lot of other factors which kick in. That affects our bottom line.”

He adds that the practice of hoarding is not only limited to pulses, but extends to other foods including onions and sugar.

Business leaders and investors had been hoping that the RBI would continue to cut rates, which makes borrowing funds cheaper for companies and helps to spur economic growth. But the rise in food prices had led to economists ruling out further rate cuts during this financial year

“As it is, inflation expectations have been rising over the past few months, in all likelihood on the back of the recent rise in food inflation,” says Shilan Shah, the India economist at Capital Economics.

The latest inflation figures “highlight the difficult task the RBI faces in meeting its medium-term targets”, he says. “This bolsters our view that the window for further interest rate cuts has closed. Inflation remains below the RBI’s 6 per cent target for January 2016. But attention has now turned towards meeting the medium-term inflation targets of 5 per cent for March 2017, and 4 plus or minus 2 per cent for March 2018. Meeting these targets will prove to be an altogether tougher challenge.”

Pankaj Sharma, the head of equities at Equirus Securities, explains that the price increases for pulses and spices are “essential items” for many. “Some of the poorest areas are seeing a much higher inflation,” he says, such as the states of Odisha and Chhattisgarh.

Food inflation in rural areas at 6.6 per cent in December is higher than urban areas, where it came in at 6 per cent, which “is indicative of rural stress and even supply side constraint”, says Mr Sharma.

“Apart from an uncomfortable situation on inflation for RBI, the rural versus urban divide will also be a challenge for the government,” he says, adding that the government may be inclined to announce more money for rural areas.

“The rural investment push the finance ministry was talking about could become a priority for government. The crop sowing has been lower this winter season and there is a serious impact on wheat. We think this will be a key factor for cereals for inflation numbers.”

Sambhavna Seth, an Indian television presenter and dancer, also feels strongly about the issue of food price.

“Commodities that are used in our day-to-day lives should be charged nominally as a huge population in our country gets affected by any hike, be it food grains or vegetables,” she says. “The government should bear in mind these basic things and, if required, can increase prices of luxury goods as luxury is a choice and not a necessity.”

SB Nawaz, a teacher based in Mumbai, who was shopping in the market this week, says she was finding food prices in India increasingly expensive, which makes managing the household budget more challenging.

“When prices go up, we are forced to pay that amount,” she says. “We can’t do anything.”

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