High prices of tomato have been a cause for concern for the RBI since spillovers from tomato price spikes to prices of other commodities may put inflation at risk
Steady increases in the price of the humble tomato have not only punched a hole in household budgets but may even cause a headache for the Reserve Bank of India as it tries to keep a leash on inflation. The central bank remains worried that the steep price spike of tomato prices have spilled over to other items causing inflation volatility.
“Spillovers from tomato price spikes to prices of other commodities and unhinging inflation expectations remain a major concern. Increasing amplitudes of price spells over the years calls for improving the supply chains to contain overall inflation volatility,” RBI says in its monthly July bulletin.
Typically tomato prices have been an important contributor to volatility in overall inflation, as its price volatility also gets transmitted to prices of other vegetables in both retail and wholesale markets. As the tomato is a highly perishable item with a very short crop duration, it shows seasonal variation in prices but these episodes are short-lived, RBI says.