India’s surging food prices are a problem not just for India
To read more of The Economists data journalism visit our Graphic detail page. TO TASTE THE effects of inflation in India, visit a fast-food restaurant. Sandwiches at Subway no longer come with a free cheese slice. Burgers at McDonalds and Burger King are tomato-free. Restaurants are scrimping because of soaring food costs. Local eateries are hiking up the prices of tomato-based dishesa staple across the country. In July vegetable prices increased by 37% year on year; tomato prices at some wholesale markets have surged by 1,400% over the past three months. All told, the annual food-inflation rate jumped to 11.5% in July, the highest in more than three years, pushing overall inflation to a 15-month high of 7.4% (see chart). Food prices have surged largely because of erratic weather. Heavy rains in many parts of the country have submerged farmland and disrupted supply chains. Elsewhere, heat has withered crops. At the end of July farmers across India had sown 40% less than they normally would have done by that point in the year. And now an exceptionally dry August threatens to hurt output further. Rainfall this month is set to be the lowest in more than a century. The Reserve Bank of India is holding its nerve for now. On August 10th the central bank left interest rates unchanged for its third consecutive meeting since April. Shaktikanta Das, its governor, believes that the spike in food costs is temporary and expects prices to start falling from September. Some analysts disagree. Historically, vegetable prices have tended to increase during the monsoon months of June to September before falling back. But some economists believe that the current rise will last longer. The government is being more proactive than the central bank. On August 19th it imposed a 40% tax on onion exports, hoping to increase domestic supply and push down prices. That announcement followed an export ban on some varieties of rice and a removal of import restrictions on tomatoes from neighbouring Nepal. The food ministry is also releasing some of its grain stocks into the market to hold down prices. More subsidised tomatoes and onions are being offered to poor households. The government is expected to spend 1trn rupees ($12bn) all told to rein in food prices. That is understandable. With important state elections coming up and a general election scheduled for next year, the ruling Bharatiya Janata Party knows that Indian voters wont put up with expensive food. According to a national survey published last week, perceptions of the central governments performance have fallen in recent months, partly because of inflation. Around 59% of people now believe it is doing a good job, down from 67% in January. Indias policy responses may help contain the cost of living, but they could raise it elsewhere. Global rice prices have shot up since India restricted exports of the grain. That will hurt billions of people: about 80% of the worlds population lives in countries that are net importers of food. But climate change is likely to make policies like Indias more common.