Demonetization relapse:Vegetable prices in retail and wholesale crash as cash purchase power goes down bigtime

NewDelhi,Dec2:In distant rural areas, local vegetable prices — both wholesale and retail — have crashed as the oxygen of currency has been suddenly sucked out. Since the whole economy depended on cash, from transport to mandis to purchase prices, this is unsurprising.

But in cities, where there is more liquidity, vegetable arrivals in mandis have increased and wholesale prices have dropped but, surprise, retail prices have remained largely unaffected or are only slightly lower.

An analysis of arrivals and prices data from 29 big cities from major states and Delhi shows that for a range of common vegetables, arrivals in mandis have actually gone up since November 8 when 500 and 1,000-rupee notes were rendered invalid. There has been an increase in arrivals of vegetables in many cities across India, including Bengaluru, Chennai, Kolkata, Mumbai, Pune, Hyderabad, Patna and Guwahati.

Wholesale traders in Delhi say this was driven by the fact that cash payments were still possible in bigger cities, unlike small rural markets. So, in the surrounding areas, there was a move to sell the produce in urban areas.

As a result, barring okra (bhindi) and onions, the quantities of common vegetables like cauliflower, potato, tomato, cabbage, gourds, chillies, brinjal and peas reaching daily in wholesale markets of these cities increased by 10-30% between the week preceding November 8 and the fortnight following it. This should have led to falling vegetable prices for urban consumers. But that was not to be.

 Wholesale traders seem to have bargained with the desperate producers to push down wholesale or purchase prices substantially but did not pass on the full benefit to consumers. In all the big cities, data shows wholesale prices dipping in the post-demonetisation fortnight compared to the week before. In Delhi, for example, cauliflower, brinjal (round) and cabbage wholesale prices fell by over 50% each, peas and potatoes by about 40% and tomatoes by 13%.

Onion prices increased by 14%, possibly because it is not as perishable as other vegetables and hence it was being held back. Okra prices increased by 23% for unknown reasons. But at the local sabziwallah, prices are at their usual levels, except for a downward trend in cauliflower, brinjal and cabbage — all dipping by over a third post-demonetisation.

Onion prices have increased by 21%, reflecting the rise in wholesale prices. “This is the rate we are getting at the mandi. The wholesalers are making money, not us,” said Mangat Ram, a vegetable seller in East Delhi who claimed that his sales had dipped since November 8
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