Why Your Groceries Cost 9% More This July

The retail price of tomatoes touched Rs 93 per kg on July 19 in Delhi, as per data from the Department of Consumer Affairs, under the Ministry of Consumer Affairs, Food and Public Distribution. The price of the vegetable, a staple in kitchens throughout India, was Rs 40 on July 1, which more than doubled in just two weeks.

The soaring prices led Union Minister for Consumer Affairs, Food and Public Distribution Pralhad Joshi to arrange for the sale of subsidised tomatoes in select locations in Delhi and the National Capital Region. The tomatoes on sale in these locations are sourced from mandis.

But tomatoes are not the only commodity whose prices are soaring: Inflation as measured by the Reserve Bank’s Consumer Food Price Index (CFPI) was at 9.36% in June 2024, while general inflation was at 5.08%. It fell to 5.42% in July 2024, with inflation falling to 3.54%.

The CFPI includes commodities and foods that constitute a large share of household consumption expenditures, explained Sudha Narayanan, an economist at International Food Policy Research Institute. “The government tracks some commodities such as onion, potato and tomato since these are widely consumed and tend to be politically sensitive,” she added.

The cost of meeting the minimum nutrition requirement is not always in line with food inflation, as per an analysis of data from the upcoming IndiaSpend dashboard being developed in collaboration with Respirer Living Sciences.

A month’s groceries for a family of four in July 2024 cost Rs 7,057, up 9% from June 2024 when the same commodities cost Rs 6,461. Compared to July 2023, there was a 0.8% increase from Rs 6,995, while month-on-month food inflation was 5.42%, we found.

India has the highest number of undernourished people in the world, as per the State of Food Insecurity and Nutrition in the World 2024 report. High food prices were found to increase child mortality and stunting (where children are short for their age). Around 801 million people avail of subsidised food grains under the National Food Security Act, even as activists argue that an additional 80 million are eligible for these benefits.

State-wise data show wide variations

Bigger states like Maharashtra, Andhra Pradesh, Telangana and Kerala, the northeastern states, Goa and the Union territories of Dadra Nagar Haveli and Daman and Diu had higher prices, our analysis found. The northeastern states and Goa pay the most for their groceries.

Source: Respirer Report on Balanced Diet Cost Index

A possible explanation for the variation in price trends across states is that when prices rise, food commodities are much more likely to make their way to large consumption centres than to the smaller ones such as census towns and villages, tempering prices in larger cities, according to Narayanan. “In our previous work we found that the behaviour of prices varies across cities based on their size. A lot also depends on the specific market structure for that commodity and the nature of value chains,” adding that we must be cautious about generalisations because the reverse can also be true at certain times, i.e. price rise can be worse in bigger states.

We calculated the costs for a family of four. The minimum nutrient requirements are derived from the Dietary Guidelines for Indians developed by the Indian Council of Medical Research and National Institute of Nutrition. Data on prices were obtained from the Department of Consumer Affairs’ daily report on prices of essential foods.

While the CFPI is calculated for states, it is not based on nutrition requirements. “The CFPI is linked to documented consumption patterns, albeit from 2011-12. This means that in calculating the average, it gives weightage according to the share of that commodity in actual food consumption,” explained Narayanan. “It is linked to actual and not recommended consumption, and it does not incorporate the prices of some important commodities, such as green leafy vegetables.”

Our analysis focuses on the minimum cost of what should be consumed and estimates the lowest cost at which such a diet can be purchased. Consumer preferences and dietary diversity are not considered, and the cost of the cheapest item in a food group is included in the bill. For example, for meeting the requirement of protein, the cost of the cheapest source--1 kg of gram dal--is considered instead of an average of the cost of all pulses and meat.

Vegetable inflation fell to 6.83%

Vegetables are a key source of iron and other micronutrients like zinc, folate, vitamin A, etc., which Indian children do not consume adequately, as IndiaSpend reported in August 2023.

In July 2024, the vegetable inflation--compared to July 2023--was 6.83%, as per the Ministry of Statistics and Program Implementation’s press release. This is above an already high base: The vegetable inflation for July 2023 was 37.34%.

Tomato prices outstripped all other fruits and vegetables with their rate of increase. By mid-July this year, the price of tomatoes in Delhi had reached Rs 93 per kg. After the Union government’s intervention, the price settled at Rs 60 per kg. On August 3, 2023, 1 kg of tomatoes sold at Rs 213 in Delhi, as per the Ministry of Consumer Affairs’ dashboard.

Delhi, which gets its tomatoes from a centralised distribution system and is sold in retail shops called Safal, is suitable for an intervention such as the one announced by Union minister Joshi. In addition to procuring tomatoes from farmers from the outskirts of the city, the government can also get tomatoes from Himachal Pradesh and Madhya Pradesh, according to A. Amarender Reddy, joint director at the School of Crop Health Policy Support Research, ICAR-National Institute of Biotic Stress Management, Raipur.

In the absence of other vegetables, especially in the summer, people have no option but to consume tomatoes and potatoes, explained Reddy. “Potatoes and tomatoes are consumed in every meal in every region in the country, even when other vegetables are absent from the market. This creates a pressure on the price of the crop.”

The supply and price of potatoes is stable all year round because they can be kept in cold storage facilities. “Most vegetables cannot be stored in their raw state for very long,” explained Reddy. “For price stability, we will have to shift to modern methods that involve growing vegetables closer to the places where they are consumed.”

Given their political significance, the government moved quickly to stabilise tomato prices in Delhi, undoing the increase in prices caused by the heat wave in neighbouring states, said Siraj Hussain, former Union agriculture and food processing secretary. “The arrivals from southern states are now very good and prices have declined. In the last few weeks the wholesale prices have dropped by about 40%. Where the average wholesale price for a crate of tomatoes (25 kg) in AP and Karnataka was around Rs 900-1,000 two weeks ago, it has now fallen to Rs 400-600 per crate,” he explained.

Farmers lose both in times of scarcity and abundance

The top five tomato-producing states in the country in 2021-22--Madhya Pradesh, Andhra Pradesh, Karnataka, Tamil Nadu and Orissa--accounted for 50% of the total output. Its cultivation is highly concentrated: Only a few blocks in certain districts grow it, according to Reddy. “If production were spread across India and distributed evenly throughout the year, then when the output in one part is affected, the other regions can step in to fill in the demand-supply gap, like in the case of rice.”

Hilly states like Himachal Pradesh harvest their tomato crop in July-September. This year, the region suffered widespread flooding, causing damage to the crop and affecting the supply chain.

Tomatoes need a temperature range of 18-25°C with nighttime temperatures between 10 and 20°C Celsius, according to the Food and Agriculture Organization. They are very sensitive to heat and humidity, with temperatures above 25°C and humidity reducing the yield.

For these and a host of other reasons, tomato prices rollercoaster throughout the year, not always in tandem with food inflation. Thus, when food inflation was at 8.3% in January 2024 and vegetable prices were up 27.03% compared to the previous year, tomatoes were selling at Rs 28 per kg in Delhi, less than a third of their peak price this year. A year before, in January 2023, its lowest retail price in Delhi was Rs 20 per kg, a tenth of the peak price.

However, farmers do not make the kind of windfall profits that consumers expect them to make in such periods. In July 2023, the wholesale price of tomatoes was Rs 8,302 per quintal. Only a third of this price accrues to the farmers, as per this analysis of data from Azadpur mandi in New Delhi by economists from Indian Council for Research on International Economic Relations.

“We can increase the share accruing to tomato farmers to 40-50% if we streamline the process of procurement and selling,” said Reddy. “The entire surplus reaches the market in the winter. At that time, the farmers are barely able to recover the cost of their own labour.” The month-on-month inflation for tomatoes was -24.42% in December 2023.

A major part of the produce of tomatoes, that is, 58%, is sold to private traders, according to the Dalwai Committee report on doubling farmers’ incomes. In contrast, onions and potatoes are sold in regulated markets, or mandis. “The lack of holistic logistics as a bridge between demand and supply, also allows for easy manipulation and monopoly in sensitive crops like onion, potato and tomato,” said the report.

“Since the time of the United Progressive Alliance [government], it was not imperative to sell horticulture crops in mandis, but they still come,” said Hussain, adding that it is possible to procure vegetables at mandis by investing in cold chains. “The government should be creating cold chain infrastructure in agricultural produce market committee mandis instead of disrupting the mandis and promoting trade outside them.”

Apples are stored in a controlled atmosphere, in which the oxygen and carbon dioxide level is controlled, thus slowing the ripening. Potatoes are simply kept at low temperatures between 3 and 7°C. Fruits like papaya and mango can be harvested before they ripen fully and can travel up to 10 days. Tomato farmers however have to wait till their crop ripens fully, and their surplus cannot be stored, even under refrigerated conditions, for more than a few days.

“If the produce is pre-cooled, then it can last 2-4 days, and it will need to leave the farm gate in a refrigerated van,” explained Hussain. One solution is to process them, and popularise the processed form of tomato that can be consumed throughout the year, he added. “If Maggi can be so popular, why not tomato paste or puree? At least the affluent classes can easily switch to them.”

How can we ensure stable and guaranteed prices for both consumers and farmers? “Use price forecasting methods, stagger the production accordingly and plan for periods of shortages and excess,” explained Reddy.

“Ultimately, the future of vegetable markets lies in the adoption of modern technologies like polyhouses and precision farming so that we can create a controlled environment safe from floods, droughts and temperature variations for better yields closer to the centres of consumption, and also in the building of cold chain, food processing industry, etc.,” said Reddy.