Owing to the effect of high base of previous year coupled with a bumper rabi harvest and good prospect of kharif harvest, ratings agency Crisil expects India’s retail food inflation, measured through the Consumer Price Index (CPI), to ease in the second half of this financial year. It added that the key risk to this forecast remains the rate of spread of Covid-19 in rural areas, which may adversely impact the harvest and the supply chain, pushing up retail food prices.
However, the key risk to this forecast is a faster spread of Covid-19 afflictions in the hinterland. As per the report, since the lockdown began in late March, wholesale and retail food prices have diverged. In April-July, the average WPI (Wholesale Price Index) food inflation was 2.9%, while CPI food inflation was 9.8%. Farmers didn’t benefit from this divergence.
A detailed analysis of 25 key field and horticulture crops done by Crisil indicates that per hectare profitability will improve 3-5% year-on-year to Rs 10,000 in the kharif season 2020, based on C2 or the cost of production. Sugarcane and paddy continue to be the highest profit generating field crops due to government support while apple is expected to lead horticulture profitability.
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