India’s federally held cereal stocks, which supply subsidised grains to 800 million people, have declined to a five-year low as extreme weather pummelled both winter-sown wheat and summer-sown rice crops, driving up retail food prices to a 22-month high.
However, total stock of the two staples, at 51.14 million tonne as on October 1, were nearly 66% above the mandatory buffer norm and strategic reserve stockpile of 30.77 million tonne that the government is required to maintain for this time of the year, data from the Food Corporation of India (FCI) showed on Thursday.
Rice stocks are sufficient to meet domestic requirements but wheat stocks have plunged to a 14-year low mainly because the government could procure only about half of its target as farmers increasingly sold to private traders due to high export demand due to the Ukraine war.
A prolonged heatwave in March crimped wheat output, prompting the government to ban export in May as supplies dwindled. The government also put curbs on overseas rice shipments last month, imposing an export duty of 20% and banning shipments of broken rice to shore up domestic availability.
Low state-owned reserves of cereals will tighten the government’s food-management operations to meet requirement for food handouts and keep prices high.
India’s consumer inflation rate surged to a five-month high of 7.41% in September on an annual basis, compared to a 7% rise in the previous month, breaching the Reserve Bank of India’s (RBI) target of 4-6% for the ninth straight month, data released on Wednesday showed.
The jump in retail prices was driven by broad-based increase in food prices in September, just like in the previous month, with cereals, pulses, vegetables, milk and milk products maintaining a rising trend.
Food inflation leapt to a 22-month high of 8.4% in September, complicating the government’s responses so far to bring down prices.
“The seasonal impact of rains on vegetable prices will now become discernible. Going forward, the unseasonal rains in different parts of country up to 700% in cereal producing states could have a significantly large impact on cereal and vegetable prices,” said Soumya Kanti Ghosh, group chief economic adviser of the State Bank of India, in a note on Thursday.
A rise in food prices hurts poor households more because they tend to spend a higher proportion of their monthly budget on staples, milk, vegetables and protein items. They also increase pressure on the Reserve Bank to raise benchmark lending rates to cool inflation, which tends to hurt growth.
Wheat stocks stood at 22.7 million tonne on October 1 were just above the minimum threshold of three-month operational stock requirement and strategic reserve of 20.5 million tonne for this time of the year.
Rice stocks as on October 1 stood 20.47 million tonne and unmilled paddy at 11.83 million tonne, compared to the previous year’s 25.33 million tonne and 14.07 million tonne respectively.