Food inflation surges due to premature rise in temperature, inflation rate is 6.8 percent possible this year: CRISIL

Rating agency Crisil said on Monday that the rise in mercury in the country in early 2022 has been the main domestic reason for the rise in the prices of food items. In the current financial year as compared to 2021-22, the agency has food prices Keeping in view the pressure, the Consumer Price Index (CPI) based inflation is projected to be 6.8 per cent in 2022-23. This is slightly higher than the Reserve Bank of India’s (RBI) estimate of 6.7 percent. RBI has been citing the rise in inflation as the main reason for Russia-Ukraine war and consequent rise in commodity prices. Inflation has consistently remained above the Reserve Bank’s satisfactory level (2 to 6 percent). At present, the share of food items in the Consumer Price Index is 39 percent.

Prices rise due to impact on supply

Crisil Research said in a report, the main reason for the inflation rate of food articles is lack of supply. The reason for the short supply is the sudden increase in domestic heat with the Russo-Ukraine war. The rating agency said, “We estimate consumer price index based inflation to be 6.8 percent.” This is based on the estimate of food inflation to be at the level of 7 per cent. According to the report, the inflation rate of food items is a major challenge before the Monetary Policy Committee. As the summer progressed, the average temperature in northwest and central India reached a 122-year high. The rise in mercury has affected crops like wheat, groundnut, millet and mango.

Premature heat stroke worsened the situation

Crisil said, heatwave is the main domestic reason which has increased the prices of food items this year. This points to a 2020 RBI study. It said the macroeconomic impact of climate change on food inflation has been statistically significant for India over the past two decades.