Why pulses continue to be a key contributor to food inflation

Pulses have seen a long-term average consumer-price inflation of 8.8% from 2007 till date, CRISIL has noted in its latest report. “For majority of Indian households, pulses are a key source of protein. In line with WPI inflation, CPI for pulses is also settling around the long-term average of 8.8%. This implies that pulses continue to remain a key contributor to food inflation for households,” CRISIL says in the report.
Not only that, the prices of pulses are unlikely to come down substantially any time soon from the households perspective, Dharmakirti Joshi, Chief Economist at CRISIL tells TOI. “That is because unless there is a price incentive for farmers they will not step up production,” Joshi says.
One important point the report states is that the volatility in pulses inflation has reduced substantially. This in turn works well for farmers since price cycle shocks negatively impact sowing decisions. According to CRISIL, the volatility has come down due to four reasons; farmers have stepped up production, government procurement is higher, active intervention by government on the imports front, and weather influencing supply.
However, while the volatility has reduced, the overall wholesale price inflation of pulses have remained stubborn at over 9%, says CRISIL. This is higher than cereals and vegetables. Also, the report quotes the Commission for Agricultural Costs and Prices’ observation that while wholesale prices have been above MSP, market prices realised by farmers still remain below it for key pulses. This is one of the reasons why pulse prices for households are also unlikely to come down anytime soon.
Explains CRISIL’s Joshi, “The full benefits of the almost 9% WPI of pulses is not reaching farmers. The government needs to strengthen procurement and reduce market inefficiencies so that farmers prefer sowing pulses over cereals.” Sustained increase in pulses production remains critical to bring down its share in food inflation over the long run.
“The price incentive could be in the form of subsidies instead of only MSPs so that the full brunt of higher prices does not fall on consumers alone. In the long-term if prices are high, farmers will be incentivised to increase production which will ultimately lead to lower overall prices of pulses for the consumers,” he tells TOI.
Joshi is of the view that as income levels of individuals rise, the demand for a protein rich diet will go up, hence increasing the demand for pulses. “So the government will need to find a fine balance between reasonable prices for households and farmers getting the full benefit of those prices,” he prescribes.

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