Vegetable, Milk Prices Rise: RBI Says Inflation To Hit Household Further If Crude Remains Above $100

Even as the prices of key commodities like vegetables, metals and milk are on the higher side, as international oil prices have increased amid the ongoing geopolitical tensions, affecting the common man, the Reserve Bank of India (RBI) on Friday said if the crude price rises 10 per cent above the baseline of USD 100 per barrel, domestic inflation could increase even further.

Lemon prices in the national capital on Friday went up substantially. “Rs 100 per kg is a reasonable price range but paying Rs 250 per kg for lemons is too much. People are not willing to buy due to high prices. Besides, it’s difficult for us as well to buy at these rates,” a lemon seller told news agency ANI. Its prices have risen in other parts of the country due to the damages to lemon plants during the cyclone last year in Andhra Pradesh, Maharashtra, and Gujarat.

In Delhi, Tomatoes are currently now being sold for around Rs 40 per kg, compared with Rs 25-Rs 30 earlier, reported another news agency PTI. Bottle gourd is now being sold for Rs 40 per kg. Potatoes have also gone costlier, with the current price being at Rs 25 per kg. Earlier, it used to be sold for Rs 10 per kg. The prices have also increased in Noida and other parts.

Recently, milk prices have also increased. Amul, Parag and Verka raised their milk prices by Rs 2, due to higher input costs. “This price hike is being done due to rise in the cost of energy, packaging, logistics, cattle feeding costs,” Jayen Mehta, chief operating officer of Gujarat Cooperative Milk Marketing Federation (GCMMF), a marketer of Amul milk and milk products, has said.

In the first bi-monthly monetary policy statement for 2022-23, the RBI said a combination of high international commodity prices and elevated logistic disruptions could aggravate input costs across agriculture, manufacturing and services sectors.

On the electricity prices, rating agency ICRA has said the sharp increase in the notified domestic gas prices for H1FY2023 would lead to an increase in the variable cost of generation for the domestic gas-based power generation projects by more than Rs 2 per unit compared to the cost of generation at the earlier notified price.

The price rise is mainly attributed to higher transportation costs due to costlier petrol and diesel prices. This is on the back of the recent spike in the international crude oil rates due to the global uncertainties on the ongoing Russia-Ukraine war. Petrol, Diesel prices in the country have increased by Rs 10 a litre in the past two weeks.

The RBI in the policy statement said, “Assuming crude oil prices to be 10 per cent above the baseline of USD 100 per barrel, domestic inflation and growth could be higher by around 30 bps and weaker by around 20 bps, respectively, over the baseline.”

Currently, the benchmark Brent crude is hovering at USD 101.34 per barrel. “Global crude oil prices briefly crossed US$ 130 per barrel, touching their highest level since 2008 and remain volatile at elevated levels, despite some correction,” the RBI said.

The Reserve Bank of India (RBI) on Friday revised upwards its retail inflation forecast to 5.7 per cent for the current financial year 2022-23, as compared with the 4.5 per cent projected earlier. RBI Governor Shaktikanta Das said the central bank has upped its CPI inflation projections as “heightened geopolitical tensions since end-February have upended the earlier narrative and considerably clouded the inflation outlook for the year”.

Das said private consumption, the key driver of domestic demand, remains subdued at 1.2 per cent above its pre-pandemic levels. On the supply side, contact-intensive services still trail the 2019-20 level. “Nevertheless, the Indian economy is steadily reviving from its pandemic-induced contraction.”

The Reserve Bank of India (RBI) is mandated to keep inflation within the range of 2-6 per cent. While the CPI-based inflation rate in February stood at 6.07 per cent, the rate in January was 6.01 per cent.

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