In November, vegetable prices fell by 13.6% compared to last year . Along with eggs, these were the only two items that recorded a fall. However, not all vegetables followed this trend. Tomatoes were an outlier with a staggering 31% rise in costs. Their bloated costs were induced by a drastic fall in supply. Also, when demand surged, traders and retailers increased their mark-ups, inflating prices further.
Highs and lows
India's retail inflation rate, measured by the Consumer Price Index, stood at 4.91% in November. The price of oils and fats, fuel and light, and transport and communications increased the most in November. On the other hand, vegetable prices contracted by 13.62%.
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The chart plots the retail inflation rate of vegetables in November against their assigned weights in the inflation calculation. Two of the three staple vegetables which carry much weight in the calculation — onion and potato — recorded a 30% and 45% drop in prices respectively compared to a year ago. However, the vegetable which carried the third most weight, tomato, recorded a 31% rise in prices compared to last year. No other vegetable recorded an increase of more than 20% in prices.
Costly vs cheap
A look at retail prices show that there is no distortion in inflation figures. Chart shows the retail prices of staple vegetables for the past two years. Tomato prices have been rising since October, while prices of onion and potato have softened. A kg of tomato, which cost ₹41 in November 2020, was ₹58 in November 2021 — a 42% rise.
The price of tomato was costlier across centres in November and December. In Amritsar it crossed ₹83/kilo in December and in Guwahati it touched ₹76/kilo on an average. In Bhubaneswar a kilo was bought for ₹70 on an average in December whereas in Bengaluru and Lucknow it crossed the ₹60 mark
Arrivals and mark-ups
The surge in tomato's November prices was preceded by a steep fall in their arrivals at the markets. The coloured lines in Charts 4A, 4B and 4C depict tomato arrivals in select cities in the last few November months. The coloured lines in the charts depict the average prices in November. Across all cities, a clear pattern emerges from the charts — if arrivals dip, prices surge. However, how is this price rise being managed, and who benefits from this? Charts 5A, 5B and 5C depict the difference between the wholesale price and retail price in all the months between Jan. 2017 and Nov. 2021. As can be observed, the price difference is peaking again in November 2021. This indicates that as the demand surged and supplies dropped, retailers increased their mark-up and sold at a much higher multiple than what they purchased. The graphs show that this is a routine practice almost every year-end when supplies drop and demand peaks.