The union government has built a record reserve of 200,000 tonne of onions to douse any inflation during an oncoming lean season, which can impact the wider economy and households alike, an official with knowledge of the matter said.
Prices of some food items, where seasonality plays a big role, tend to be volatile. Onion is one of them. Its rates often stoke food inflation and knock the monthly budgets of consumers, poor or rich, because the vegetable is a base ingredient of most Indian dishes.
Past data shows onion prices usually tend to rise during September because the month marks the beginning of a nearly three-month lean season, when stocks from previous crops deplete. Fresh harvests usually arrive in markets during winter.
Retail prices, as measured by the Consumer Price Index, rose 6.25% in June, slightly lower than a 6.3% rise in May, but driven by higher food and fuel costs, latest official data show. The retail inflation rate is above the Reserve Bank’s target of 4% (+/-2). Inflation in the food and beverages category stood at 5.58%, compared to 5.24% in May.
Price rise is a key determinant of monetary policies. Moderate inflation helps the Reserve Bank to keep interest rates low to spur economic activity, which has been hit by the pandemic.
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