Dearer vegetables send CPI inflation up to 8-month high

by Manasi Swamy

Retail price inflation in India, measured by the Consumer Price Index (CPI), shot up to an eight-month high of 7.3 per cent in September 2020 from 6.7 per cent in August 2020, thanks to skyrocketing vegetable prices. Vegetables account for six per cent of the total consumption basket of an average Indian. These contributed to 86 per cent of the 65 basis points increase in headline inflation seen in September compared to August. Vegetable prices ruled 20.7 per cent higher than their year-ago level, which was almost twice the y-o-y increase of 11.5 per cent recorded by them in August.

Among vegetables, inflation in potato prices shot up to 102 per cent in September from 79.6 per cent in August. Lower supplies and increased demand for the tuber during the Covid-19 pandemic due to its longer shelf life made potato prices spiral up. Uttar Pradesh and West Bengal contribute to nearly 55 per cent of potato production in India. Farmers in these states planted less area under potatoes due to poor returns the crop fetched in the preceding two years. This, coupled with localised lockdowns observed to arrest the spread of Covid-19 infections across India, affected potato supplies.

Inflation in tomato prices spiked to 54.6 per cent in September from seven per cent in August. Prices shot up as supplies from the southern states of Andhra Pradesh, Karnataka and Tamil Nadu, along with Maharashtra got disrupted due to heavy downpour in September. These states collectively account for over a third of the tomato production in India.

Prices of other vegetables like radish, carrot, brinjal, cauliflower, cabbage, lady’s finger, parwal, pumpkin, peas, beans, green chillies and leafy vegetables also rose in September, thus contributing to the rise in overall vegetable inflation. Onion prices, on the other hand, declined y-o-y by 12.8 per cent in September. Onion prices had spiked this time around last year, following which the government had banned onion exports. This year, though onion prices remain lower than their last year’s level, prices started rising sequentially in September. Taking cognisance of this and a robust 30 per cent increase in exports seen during April-July, the government banned exports of onion in mid-September 2020 as a precautionary measure.

Inflation in the egg, fish & meat group inched up to 17.4 per cent in September from 15.9 per cent in August on short-supplies of these. According to Mumbai Egg Traders’ Association, during the lockdown, poultry farmers were unable to rear birds and procure feed for them. Even today, the main supply centres in Andhra Pradesh, Tamil Nadu, Karnataka and Maharashtra are struggling to meet the demand. Inflation in the egg, fish & meat group jumped into double-digits in May and has remained elevated since.

The oil & fats group too contributed to the rise in headline inflation. Oil prices rose y-o-y by 13.4 per cent in September, faster than the 12.5 per cent rise registered in August. Vegetable oil prices have been rising globally. Since India meets nearly half its domestic demand for vegetable oils through imports, higher oil prices in the international market and weaker rupee compared to a year ago have translated into higher oil & fat prices in the domestic market too.

Inflation in prices of cereals softened for the third consecutive month in September. It eased to 4.7 per cent from 5.9 per cent in August and 6.9 per cent in July. Milk, sugar and spices too saw a fall in inflation to 5.6 per cent, 2.5 per cent and 11.7 per cent, in September, from 6.2 per cent, 3.9 per cent and 12.4 per cent, respectively, in August.

Net impact of this was a 144 basis points increase in food & beverages inflation to 9.7 per cent in September compared to an already high level of 8.3 per cent seen in August. Food & beverages account for 46 per cent of the consumption basket of an average Indian.

Among other items of the consumption basket, the clothing & footware group reported a rise in inflation in September. The rise, however, was small, from 2.7 per cent in August to three per cent in September. On the other hand, inflation in the pan, tobacco & intoxicants group, the fuel & lights group, the housing group and the miscellaneous goods & services group declined in the range of 10 to 40 basis points in September as compared to August.

The core inflation, which excludes supply-driven, volatile price items food and fuel, has more-or-less stabalised at around 5.5 per cent since July, after rising steadily from 4.8 per cent in April.

References
1. https://economicoutlook.cmie.com/kommon/bin/sr.php?kall=wshreport&&tabcode=001011005000000000&repnum=94870&frequency=M&colno=1&parnum=94869&parfrq=M
2. https://economicoutlook.cmie.com/kommon/bin/sr.php?kall=wshreport&&tabcode=001011005000000000&repnum=94873&frequency=M&colno=1&parnum=94872&parfrq=M
3. https://economicoutlook.cmie.com/kommon/bin/sr.php?kall=wshreport&&tabcode=001011005000000000&repnum=94897&frequency=M&colno=1&parnum=94896&parfrq=M
CMIE STATISTICS
Unemployment Rate (30-DAY MVG. AVG.)
Per cent
6.6 0.0
Consumer Sentiments Index
Base September-December 2015
51.8 -0.3
Consumer Expectations Index
Base September-December 2015
53.6 -0.6
Current Economic Conditions Index
Base September-December 2015
48.9 0.0
Quarterly CapEx Aggregates
(Rs.trillion) Dec 19 Mar 20 Jun 20 Sep 20
New projects 5.55 3.97 0.78 0.76
Completed projects 1.66 1.78 0.25 0.69
Stalled projects 0.61 0.73 0.11 0.08
Revived projects 0.83 0.42 0.68 0.34
Implementation stalled projects 0.13 10.02 0.09 0.03
Updated on: 01 Dec 2020 9:28AM
Quarterly Financials of Listed Companies
(% change) Dec 19 Mar 20 Jun 20 Sep 20
All listed Companies
 Income -1.7 -5.0 -27.6 -6.2
 Expenses -2.2 -1.9 -27.9 -10.1
 Net profit -10.9 -48.2 -40.2 45.3
 PAT margin (%) 5.1 2.4 5.3 8.3
 Count of Cos. 4,459 4,315 4,300 4,198
Non-financial Companies
 Income -5.5 -9.0 -37.4 -10.3
 Expenses -6.4 -5.0 -37.6 -14.0
 Net profit -13.9 -49.4 -55.7 30.0
 PAT margin (%) 5.7 3.3 4.5 8.1
 Net fixed assets 13.3 6.0
 Current assets 3.0 0.7
 Current liabilities 5.7 -2.9
 Borrowings 15.7 8.1
 Reserves & surplus 1.5 4.5
 Count of Cos. 3,312 3,229 3,221 3,160
Numbers are net of P&E
Updated on: 01 Dec 2020 9:28AM
Annual Financials of All Companies
(% change) FY18 FY19 FY20
All Companies
 Income 8.4 13.4 0.3
 Expenses 9.9 13.7 0.9
 Net profit -40.5 21.9 -18.3
 PAT margin (%) 2.0 2.3 4.2
 Assets 10.9 9.5 9.3
 Net worth 7.5 8.6 4.8
 RONW (%) 3.5 4.2 6.0
 Count of Cos. 28,425 27,638 6,888
Non-financial Companies
 Income 8.7 13.9 -2.8
 Expenses 8.8 14.1 -1.7
 Net profit -9.1 23.0 -27.7
 PAT margin (%) 2.7 3.1 4.4
 Net fixed assets 7.2 5.5 13.2
 Net worth 6.1 8.4 1.7
 RONW (%) 5.6 6.8 7.5
 Debt / Equity (times) 1.0 1.0 0.8
 Interest cover (times) 2.1 2.4 2.8
 Net working capital cycle (days) 77 70 57
 Count of Cos. 23,077 22,402 5,084
Numbers are net of P&E
Updated on: 28 Nov 2020 11:22AM