Tomato, onion stoke fears of higher food inflation

Tomato and onion prices are surging in northern India, pushing food costs higher and renewing concerns about food inflation. The heat wave this season has damaged crops and disrupted transport, particularly for tomatoes, which are highly perishable. Extreme temperatures reduced yields and raised spoilage along supply routes, local traders said.

Food accounts for about 46% of India's consumer price index, so vegetable price spikes can quickly feed through to headline inflation. The June CPI print is due later this month. It will show whether gains in tomatoes and onions are spilling into the broader food basket.

The Reserve Bank of India has kept its policy rate unchanged since February, noting the risk from food prices. The central bank's next policy meeting is in August. Traders are watching the vegetable price data for signs that the trend is broad-based, which would keep pressure on the RBI to hold rates steady.