Why are food prices rising?

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: The wholesale price index has declined steadily over the last six weeks by as much as 4.5 percentage points. The latest figure is 8.4%. Food prices, on the other hand, are rising again and food price inflation reached a calendar year high of 10.5% in the week ending November 22 .

This is in sharp contrast to global trends where commodity price indices of food have fallen by an average rate of 10% since August. And what makes the trends in domestic prices even more surprising is that Indian wholesale food price inflation had remained at a benign rate of less than 7% till the middle of September even as global prices were touching peak levels.

What explains the counter-intuitive trend? First, less good news than expected on agriculture. The first advance estimate of 115.3 million tonnes of food grains in the current kharif season is almost 6 million tonnes lower that the 121 million tonnes of kharif grain produced last year. So it is not very surprising that food grain prices have moved up by as much as 3 percentage points to 9.5% since September.

Most of the increase is accounted for by rice, the main kharif crop where price inflation has more than doubled to 12.9% in the last eight weeks.

Also, erratic monsoons in the recent period seem to have impacted crops like vegetables. Numbers show that vegetable prices which were declining in the 3 months from July to September have suddenly moved up touching double digit levels at the end of October and then scaling to a calendar year high of 24.9% last week. Price inflation of fruits, which was falling at the start of the year, is now in the 15-17% range.