Onion prices bring tears to Indian households as weak rupee fuels inflation

India is facing rising inflation pressures, with the risk of breaching the Reserve Bank of India’s 6% cap, largely due to broader economic factors, though surging onion prices, a staple in Indian households, are contributing to the strain on family budgets and dietary choices nationwide.

The price of onions has reached a five-year high, with rates nearing Rs 100 per kilogram in major metro cities like Mumbai and Delhi.

Wholesale markets have also seen sharp increases, with onion prices rising from Rs 40-60 per kilogram to Rs 60-70, putting further pressure on retailers and consumers alike.

In Mumbai, prices have reportedly surged to Rs 80 per kilogram, with similar trends unfolding in Delhi, signalling potential cost hikes for retail customers as sellers struggle to absorb wholesale price rises.

The primary driver behind this escalation is the subpar quality of the Kharif onion crop in key states such as Maharashtra, Rajasthan, and Karnataka. A poor harvest has forced an increased demand for older stocks, which are more expensive. Additionally, a rise in export demand has further constrained local supply, contributing to the ongoing price surge.

This inflationary strain is compounded by a weakening Indian rupee, which recently hit an all-time low of 84.38 against the US dollar. The depreciating rupee reduces the purchasing power of Indian consumers, heightening inflation concerns as imported goods become costlier.

Combined with the rising costs of essential commodities like onions, these economic pressures are stoking fears of a prolonged inflationary phase that may extend over the coming months. The current situation presents a challenge for policymakers who aim to manage inflation within the established limits while ensuring essential commodities remain accessible to consumers.