Weak monsoon, biofuel push and global conflicts drive India's food price surge

India's household budgets are feeling the strain as key ingredients such as onions, ginger and cooking oil record steep price hikes, with the CPI indicating almost a 50% rise in onions and more than a 70% surge in ginger year-on-year. The shortfall in monsoon rainfall, running about 15% below normal and expected to remain weak, is curbing harvests of rice, corn, soybeans and sugarcane, prompting the government to allow duty-free sugar imports.

Simultaneously, a fast-tracked 20% ethanol-blending mandate is boosting demand for corn, rice and sugarcane as biofuel feedstocks, tightening domestic food supplies. Internationally, the wars in Iran and Ukraine are lifting global crop and fuel prices, adding further pressure. As food now makes up over a third of the retail inflation basket, the Reserve Bank of India faces heightened risk of a rate hike, with officials warning that persistent food and fuel price spikes could force tighter monetary policy.