The Reserve Bank of India’s (RBI) Monetary Policy Committee (MPC) is set to meet from February 5 to 7 to review the repo rate. Analysts predict a 25-basis points (bps) cut, which would be the first rate cut in nearly five years. Former Infosys CFO Mohandas Pai, taking to social media platform X, has asked the new RBI Governor Sanjay Malhotra to consider food inflation and its impact on consumers, particularly the rising cost of basic vegetables such as tomatoes, onions, and potatoes. He urges the RBI not to “punish” consumers with high interest rates to control these price increases.
A recent report by Crisil found that the price of a vegetable thali had increased by 6% in December 2024 compared to the previous year, driven by surging costs of tomatoes and potatoes. The report attributed the rise to a 24% increase in tomato prices and a 50% rise in potato prices, which have been experiencing double-digit inflation rates. The Economic Survey for 2024-25 revealed an increase in food inflation, with retail inflation averaging 5.4% in FY25, exceeding the RBI’s desired threshold of 4%.
The survey highlighted the impact of supply chain disruptions, extreme weather events, and unpredictable weather conditions on agricultural output, resulting in price pressures on essential commodities like onions, tomatoes, and pulses. Food inflation was found to be a significant driver of overall inflation, accounting for 32.3% of the increase in the Consumer Price Index (CPI). Excluding vegetables and pulses from the calculation would have resulted in a 4.3% food inflation rate, 4.1 percentage points lower than the reported figure. The survey also noted that service-related inflation, including housing, healthcare, and education, continued to rise due to robust urban demand, wage increases, and supply chain disruptions.