Consumer Price Index (CPI):
The CPI is used to measure inflation in India, reflecting changes in the general price level and cost of living.
It comprises 299 items, with vegetables holding a weightage of 6.04%.
Significance of TOP:
Tomato, onion, and potato (TOP) collectively have a weightage of 2.2% in the overall CPI basket.
Their significance goes beyond numerical representation, influencing food and beverages inflation and the headline CPI.
Impact and Volatility of Vegetable Prices
Recent Price Trends:
In FY2023-24, vegetable prices surged by about 15% year-on-year.
Prices fluctuated dramatically, with vegetable inflation rising from -0.7% in June to 37.4% in July.
Tomatoes, in particular, saw a price increase of 202% in July 2023, contributing significantly to headline inflation.
Despite their small weight in the CPI, vegetables contributed about 30% to inflation in early 2024.
In July 2023, vegetables' contribution to headline inflation was 31.9%, with TOP contributing 17.2%.
Price Volatility
Volatility Measures:
The coefficient of variation (CoV) is used to measure the volatility of inflation.
TOP’s CoV was 5.2, higher than the vegetables sub-group (CoV=3.0), food group (CoV=0.6), and headline inflation (CoV=0.3).
This indicates greater price volatility for TOP compared to other food items and the overall inflation rate.
Inflation Trends:
The inflation rate for TOP has been highly volatile, ranging from -36.6% in September 2021 to 132.0% in December 2019.
Policy Implications and Farmer Impact
The volatility and importance of TOP in inflation trends highlight the need for effective policy measures.
Suggested solutions include overhauling agricultural value chains, improving cold storage facilities, providing better prices to farmers, and reducing input costs for fertilizers and pesticides.
Challenges Faced by Farmers:
The lack of Minimum Support Price (MSP) for these crops leads to price volatility affecting farmers, who are often net buyers of these vegetables.
Short-term measures, such as lifting export bans ahead of elections, do not address long-term needs.
Farmers' Demands:
Farmers have continuously protested for MSP for onions and other crops, but their demands have been largely ignored by the government.
Notable protests, such as the Kisan Long March, have highlighted these ongoing issues.
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