India’s weak monsoon, which has heightened concerns about the country’s big cotton and sugar crops, now is also being felt by Indians on their dinner plates. The price of onions, a ubiquitous staple of South Asian cuisine, has soared as supplies suffer due to dry conditions.
In the figure above, the map on the left shows the degree to which precipitation in mid-July deviated from the 10-year mean between 2001 and 2010, for districts in India and Bangladesh. A weak monsoon left conditions in India drier than usual in major onion-producing regions, whereas a deluge flooded neighboring Bangladesh. The map on the right shows the distribution of India’s major onion-producing districts, with most production concentrated in the southern portion of the country.
Wary of anti-government protests in past years when onion prices spiked, New Delhi this time eliminated a 10% subsidy that was aimed at boosting onion exports because of the waning supplies. The government of India, which is the world’s second-largest onion producer behind China, also moved to set up a buffer stock of 50,000 tonnes to help weather any supply interruption. The onion market holds significant political influence in India and is tightly regulated by the government in an effort to control price volatility.
Monsoon precipitation is at a five-year low this season, which has stalled planting and hurt yields of a number of crops. The India Meteorological Department is predicting that rains in coming weeks will offset the shortfall. The monsoon season runs from June through September.
In the meantime, Indians are facing a severe supply pinch of onions. Local prices of Indian onions have surged 100% in Kolkata and 115% in Malda City since March, according to India Department of Agriculture & Cooperation (IDAC) data. Nationwide, domestic onion prices recently jumped 47% in a single month.
The chart above shows the change in local onion retail prices in major western India markets. The recent price spike is driven by meager monsoon rainfall, waning onion supplies, and high demand domestically and from neighboring Bangladesh.
India’s removal of export incentives has hurt neighboring countries, including Bangladesh, which typically imports onions from India to meet demand. Bangladesh’s own onion supplies have been hurt by heavy rains and flooding that have inundated fields and left hundreds of thousands of people displaced and without homes. Onion prices in Bangladesh have reportedly doubled in recent weeks.
India suffered another onion crisis in 2010, when inconsistent rains hurt production and contributed to a spike in prices. Protests broke out as Indians demanded fair prices for staple commodities. As a corrective measure, the Indian government discouraged onion exports and began importing from neighboring Pakistan.