Retail Inflation Drove Up Thali Costs, Fueled by Onion and Tomato Price Surge in October 2024

In October 2024, India’s retail inflation rose to 6.2%, the highest in 14 months, up from 5.5% in September. Onion and tomato prices, which are major components of a typical thali, surged by 46% and 51%, respectively, due to poor harvests caused by heavy rainfall in key growing regions, as per the CRISIL MI&A Research report.

Retail inflation has impacted the household budget. In this article, we examine how inflation has driven the cost of veg and non-veg thalis north.

Veg vs Non-Veg Thali: What’s Driving the Price Surge

In October 2024, the cost of a home-cooked veg thali rose by 20%, while the non-veg thali saw a 5% increase after a 12-month decline. 

On the other hand, the non-veg thali experienced a slower uptick, as broiler prices, which account for about 50% of the cost, fell by 9% year-on-year. However, vegetable prices, accounting for 22% of the non-veg thali cost, continued to rise, contributing to the overall price increase.

Tomatoes prices saw a more than 100% increase due to crop damage and festive demand. Conversely, the non-veg thali’s price increase was somewhat cushioned by the decline in broiler prices, although higher vegetable prices offset the savings.

Vegetable oil prices experienced a notable 10% increase in October 2024. This rise was attributed to a combination of factors, including an increase in import duties and strong festive demand. 

Who Feels the Inflation Pinch More: Rural Poor or Urban Rich?

Inflation impacts different income groups in distinct ways, especially when considering the urban-rural divide.

The rural poor bear the brunt, spending a larger share of their income on essentials like food and fuel. In October 2024, rural inflation stood at 6.7%, exceeding urban inflation at 5.9%, primarily due to the higher food expenditure in rural areas. 

The bottom 20% in rural regions faced the highest inflation, largely driven by rising food prices. Meanwhile, wealthier urban segments, particularly the top 20%, were less impacted due to lower core inflation (3.6%) and their reduced reliance on food and fuel, as per the CRISIL MI&A Research report.

This contrast underscores the increased financial strain on lower-income rural households, as their living costs rise faster than their incomes.

Implications for the Economy Going Ahead

India’s consumer price inflation (CPI) rose to 6.2%, surpassing the Reserve Bank of India’s (RBI) upper limit of 6%. This marked a significant deviation from the RBI’s inflation target range of 2-6%, highlighting growing inflationary pressures in the economy. 

The breach of the upper limit poses challenges for the RBI, as it limits the central bank’s room to ease interest rates in the near future, potentially impacting the overall economic growth trajectory.

Inflation at elevated levels can greatly affect individuals, particularly by reducing their purchasing power and increasing everyday expenses. As prices climb, essential items become more costly, stretching household budgets. 

Additionally, inflation erodes the value of savings, making it more challenging for people to reach long-term financial objectives. This effect is even more severe for those on fixed incomes, such as retirees, whose earnings remain unchanged while the cost of living rises.

In conclusion, while temporary price spikes in certain food categories may ease, broader inflation concerns persist, posing challenges for monetary policy and consumer spending in the near term.

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. It is based on several secondary sources on the internet and is subject to changes. Please consult an expert before making related decisions.