Wheat prices in India rose to a six-month high on Tuesday (August 8) due to limited supplies and strong demand ahead of the festival season, said a Reuters report quoting dealers.
The rising prices may prompt the Indian Government to eliminate import duties on the cereal to boost supplies and control prices ahead of key state assembly polls and the 2024 general election.
It is believed that soaring wheat prices could contribute to food inflation and can make it difficult for both the government and the central bank to control inflation.
"In all key producing states, farmer supplies have nearly come to a halt. Flour mills are struggling to obtain sufficient supplies in the market," said a New Delhi-based trader.
Wheat prices at Indore in the central state of Madhya Pradesh increased 1.5% on Tuesday to Rs 25,446 per metric ton, the highest since February 10. Prices have risen by almost 18% over the last four months.
The government should release stocks from its warehouses into the open market to avoid potential shortages during the festive season, said a Mumbai-based dealer associated with a global trade house.
As of August 1, wheat stocks in government warehouses stood at 28.3 million metric tons, up from the 26.6 million metric tons recorded a year earlier.
India is considering slashing or even abolishing a 40% import tax on wheat and lowering a limit on the amount of wheat stocks millers and traders can hold, Sanjeev Chopra, the most senior civil servant at the federal food ministry, said last week.
The All-India CPI-IW for June 2023 increased by 1.7 points and stood at 136.4. On 1-month percentage change, it increased by 1.26% with respect to the previous month compared to an increase of 0.16% recorded between corresponding months a year ago.
The maximum upward pressure in the index came from Food & Beverages group contributing 1.62 percentage points to the total change. At item level, Rice, Wheat, Wheat Atta, Arhar Dal, Moong Dal, Fish Fresh, Poultry Chicken, Egg-Hen, Apple, Banana, Brinjal, Carrot, Ginger, Cauliflower, Chili Green, Potato, Onion, Tomato, Cumin seed/Jira, Supari, Casual Wear, Canvas Shoes, Utensil, Medicine ayurvedic, etc. are responsible for the rise in index. However, this increase was largely checked by Mustard Oil, Palm Oil, Sunflower Oil, Coconut Oil, Lemon, Mango, Kerosene Oil, etc. putting downward pressure on the index.
Recommended For You
In 2023, Wheat output increased to a record 112.74 million metric tons, up from 107.7 million metric tons a year ago, according to the Ministry of Agriculture & Farmers Welfare.
India consumes approximately 108 million metric tons of wheat annually.
According to Reuters, a leading trade body said in June that India's wheat harvest in 2023 was at least 10% lower compared to the farm ministry's estimate.
The three-day Monetary Policy Committee (MPC) meeting of the RBI started on Tuesday (August 8). It remains to be seen what steps will the central bank take to control soaring food item prices. The common man in India is already bearing the burden of skyrocketing tomato prices where the price of the vegetable at one point even crossed the Rs 250 mark.