India Faces Rising Food Inflation as Monsoon Concerns Grow
Quick Look
- Consumers in India are likely to face higher prices for essential kitchen items like spices, eggs, and dairy due to rising food inflation.
- Potential monsoon deficits and heatwaves are expected to impact crop yields, driving up costs.
AI-generated summary
Why It Matters
Food inflation in India is rising, with consumers likely to pay more for essential kitchen items. This is driven by concerns over a deficient monsoon and heatwaves impacting crop yields.
New Delhi: With food inflation beginning to rise and India staring at a potentially deficient monsoon rains, consumers are likely to pay more for several daily-use kitchen items, including spices, eggs, dairy products, tea and coffee.
Inflation in these categories already ranges between 6% and 12% (see graphic) and economists expect price pressure to increase in the coming months, driven by uneven crop cycles in the upcoming kharif harvest due to likely insufficient rains and heatwaves, higher input costs and rising logistics expenses.
Also Read: Govt readies farm safety net with banks, insurers as El Nino looms
"Looking ahead, the risk to the food inflation trajectory comes from heatwaves in North-Western India, El Nino risk and forecast of a below normal southwest monsoon," said Sakshi Gupta, principal economist at HDFC Bank.
Kitchen essentials may get more expensive on higher input costs, rising logistics costs
Overall food inflation rose to 4.8% year-on-year in May from 4.2% in April.
HDFC Bank estimates food and beverage inflation at 5.8% for the second quarter ending in September and 6% for overall FY27, while Bank of Baroda projects 5.5-6% inflation for FY27.
"Regions affected by lower rainfall will definitely see price pressure because the output will be affected," said Madan Sabnavis, chief economist at Bank of Baroda, adding that an El Nino-related disruption to crop output could prolong price pressures.
He said coriander and jeera would be impacted in particular "because they are grown in relatively arid regions dependent on the monsoon."
Also Read: El Nino may hit India's monsoon, rice and maize output: FAO
Spice inflation increased to 6.8% year-on-year in May from 4.7% in April, led by dry chillies at 11.9% and coriander (dhania) at 8.8%. Prices of turmeric and oilseeds rose 3.8% and 4.9%, respectively, on-year in May.
"After two years of unprecedented deflation in spices, we are now witnessing a clear reversal with early signs of inflation returning, with spice prices seeing an uptick of about 6.5% by the end of the year and sharper increases in select categories," said Sanjay Sharma, managing director and CEO of Orkla India, maker of Eastern Spices, citing supply-side constraints, weather variability and uneven crop cycles.
What to Watch
AI outlook — possibilities, not facts
Spice prices to see an uptick of about 6.5% by the end of the year.
Likely · Within months
Food and beverage inflation at 5.8% for Q2 FY27 and 6% for overall FY27.
Likely · Within months
Open Questions
- What specific measures will the government take?
- How long will the price pressures last?
- Will other food categories be affected?
