It is said that poverty in India is declining year after year. A person who earns more than Rs 32 is above poverty line. But food inflation is so high that one can't even buy kitchen staples such as onions, potatoes and tomatoes with Rs 32. Last year, a few political leaders had made statements claiming that Rs 5 and Rs 12 were enough to eat stomach-full meal in Delhi and in Mumbai. But the fact and a stark contrast is that one can't even buy more than a quarter of a kilogram of vegetables with such amounts.

Not only the poor, but even middleclass families are finding it difficult to manage their monthly budgets nowadays. The biggest worry has been escalating food article prices and mad-rise in prices of fruits and vegetables.
 

Is there a risk of rising food and vegetable prices?

Note: The data points above are from the Consumer Price Index
(Source: MOSPI, PersonalFN Research)  

As per the movement of Consumer Price Index (CPI), vegetable and fruit prices are persistently up. Rate of inflation has been above 10% which is a cause of a worry.

Wholesale prices in Vashi market in Mumbai have gone up by about 15%-20% over last fortnight. As a result, you can hardly get any vegetable below Rs 60 in Mumbai these days. Onion and potato prices too are rising. Onion prices have nearly doubled within a month. Moreover, the supply of veggies to Mumbai is affected as trucks carrying veggies to the city of Mumbai have reduced substantially in number. Situation in Maharashtra is grim because, nearly 83% of the farming is rain-fed and rainfall thus far has been scanty.

Is weak monsoon going to worsen the situation?
The progress of monsoon is weak and rainfall has been deficient so far. The rainfall has been 31% below long term average (all India figures) until June 25, 2014. Due to low progress of monsoon, sowing in many areas has delayed by 10-15 days. As you may know, hailstorm had affected crop in February-March, and now the deficiency in rainfall is affecting supply of food grains and vegetables.

According to a senior official of the state agricultural department, if monsoon does not revive, crops such as cotton, soya bean, rice, bajra, jowar, tur, urad and moong may be affected. Adding further, he opined that, crop of custard apple, tomato and onion would also be badly affected.

Is the Government taking any action?
To restrict, exports of onions and potatoes, the Government has imposed Minimum Export Price (MEP). Apart from this, recently, the Government decided to release 50 lakh tonnes of rice to tame inflation. The Government has also blamed hoarding activity as one of the prime drivers of food price inflation. It has advised state Governments to remove fruits and vegetables from Agricultural Produce Market Committee (APMC). The Government has been planning to take more steps to curb hoarding.

PersonalFN believes rising fruits and vegetable prices are digging wide holes into pockets of millions of Indians. With wages and salaries stagnating and prices of essentials such as food articles moving upwards, common man is getting crushed. PersonalFN is of the view that while the Government may take action against hoarders and try to provide some relief from prices of vegetables (which are going up every day), a lot depends on progress of monsoon. If it fails to revive in next few days, it would be a difficult situation to tackle.

Thus in times such as these when household budgets are likely to go awry, PersonalFN is of the view that it is imperative to cut down on expenses which aren't necessary and be extremely disciplined. Such an approach would also help fulfil your larger goals of life such as children's future (their education and marriage) and even your own retirement.

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