Spillovers from tomato price spikes to prices of other commodities a major concern: RBI Bulletin
According to an article published in Reserve Bank of IndiaLatest monthly newsletter.
Increasing periods of price bouts over the years call for improvements in supply chains to contain aggregate inflation swings, according to an article titled “State of the Economy.”
In the past two months, tomato prices have jumped over ₹100 per kg, reaching nearly $200 per kg in some markets, due to crop damage and pest attacks in major production belts.
The recent spike in tomato prices due to crop damage due to bad weather and pest attacks in key production belts has received widespread attention as it has affected household budgets, according to the article put together by senior RBI officials.
total inflation
They said, “Historically, tomato prices have been an important factor in fluctuations in headline inflation… Their volatility is also carried over to other vegetable prices in the retail and wholesale markets.”
Officials note that tomatoes, being a perishable commodity with a very short crop period, show a large seasonal variation in prices but that these episodes are short-lived.
According to their analysis, the average duration of a high price episode, derived from the Markov chain transmission probability matrix, shows that prices stay above $40 with an average duration of 2.6 weeks while prices stay below $20 with an average duration of 10 weeks. .
“Multiple crop cycles with varying periods of time across locations lead to more than one wave of price hikes during the same year. While annual peaks showed a general increase, the declines remained largely constant, suggesting that prices do not rise across periods,” he said. Administrators.
total price
Empirical estimates show that although margins (the wedge between wholesale and retail prices) respond to shocks, their elasticity to wholesale prices is low—for a 1 percent rise in wholesale prices, the wedge increases by 0.1 percent.
Thus, margins act as a shock-absorbing mechanism, and thus, retail price inflation is less volatile than wholesale.