Sugar turns bitter as inflation shocks

Retail inflation has gone up for the first time since January this year. The real culprit, however, is sugar and vegetables.

According to the data provided by Ministry of Statistics & Programme Implementation on May 12, 2016, inflation in sugar and confectionery products for the month of April stood at 11.18%, second only to pulses, at 34.13%. The price rise in sugar for the rural and urban markets stood at 7.36% and 19.10%, respectively.

The Consumer Food Price Index (CFPI) rose 6.58% in rural and 5.97% in urban areas taking the total price rise to 6.32% as against general inflation of 5.39%. This means that price rise in food products, like fruits, vegetables, sugar, etc has been more than the price rise in other products and services.

According to Sujan Hajra and Moumita Paul Samanta of Anand Rathi Research, in a report dated May 12, 2016, “While fuel inflation declined from 3.5% to 3%, food inflation rose sharply, from 5.1% to 6.3%. This arose due to the noticeable hardening of vegetable inflation (from 0.5% to 4.8%) and of sugar (from 3.9% to 11.2%).”

CARE Ratings, too, seconded Anand Rathi. It said, “The food basket has contributed to this increase.”

The ongoing heat waves and acute water shortages seem to be impacting both actual and anticipated food supplies said Anand Rathi research paper.

Will sugar turn sweet?

Analysts and industry experts believe that the price rise is temporary and with the expectation of a good monsoon this year, food, vegetables and sugar prices are likely to come down in the near future.

Hajra and Samanta of Anand Rathi said,”While the high temperatures and water shortages in various parts of the country are issues of grave concern and could keep certain food prices elevated for a short period, a good monsoon could reverse these.”

CARE Ratings said, “Given the monsoon forecast, the CPI inflation rate will not cross 6% but will continue to range between 5-6% for some time.”