Peak inflation in pulses this year likely to be less pronounced: CRISIL

until Monsoons break outthe damage In many countries, retail pulses inflation is expected to be less volatile this year, according to a report from research agency CRISIL.

The total weight of “pulses and products” is 2.38 percent in the Consumer Price Index (CPI) basket. Retail inflation based on the CPI for pulses in May was 6.56 percent, higher than inflation (4.25 percent) and retail food price inflation (2.91 percent). Inflation figures for June will be released on Wednesday.

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Cobweb phenomenon

Crisel said, “This year, assuming pulse amplification continues to exhibit cobweb phenomena (albeit less pronounced), the next peak could be 6 to 7 months away.”

This phenomenon refers to a situation where the prices of some commodities experience periodic fluctuations. It happens because of wrong product expectations. Producers of agricultural commodities, for example, may decide to increase their production for a year because their product had been priced too high in the previous year.

However, this may increase production and cause prices to fall that year, resulting in losses. These cyclical price fluctuations are most severe in markets where speculators are prevented from hoarding goods to sell later at a higher price. The idea was proposed by the Hungarian economist Nicholas Kaldor.

price fixing schemes

Furthermore, absentee weather patterns in the past year have caused damage to production, which may have some impact on prices, the agency said. Also this year, “with the rains being delayed and erratic, and affecting the sowing of legumes, pressure on prices can be felt. But continued government intervention through price stabilization plans can ensure that the next peak remains less severe.”

The agency noted that in a final step, the government announced Abolition of the purchase ceiling by 40 percent Major pulses (Tour, Urad, Masur), which will allow farmers to sell any amount of their produce. This would encourage farmers and help increase the cultivated areas in the coming growing seasons. Higher purchases also facilitate better price signals through MSP advertising.

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Looking at the price situation, the Ministry of Consumer Affairs took some steps last month. On June 14, the state governments They were required to be monitored continuously Tur and Urad prices, check stock positions, and crack down on those violating stock limits order. Stock limits for Tur and Urad are set through October 31 for all states and UTs. Limits applicable to each batch are 200 metric tons for wholesalers, 5 metric tons for retailers, 5 metric tons in each retail outlet, 200 metric tons in warehouse for large chain retailers, last three months of production or 25 per cent of the annual installed capacity, whichever is higher, for mills.

The agency feels that incorrect price signals were a major cause that led to the cobweb pattern of pulse growth. Other policy measures, including the recent announcement of Limit inventory on Arhar and Masur to discourage traders from hoarding supplies, as well as keeping an eye on rising prices. It concluded that this year too, “policy makers will have to pay attention to the behavior of the monsoon and its implications for prices, and thus take measures to correct price pressures.”