Indian farmers get only a third of what consumer pays for potato, tomato and onion: RBI study

There have been multiple instances of prices of vegetables skyrocketing in different parts of India every year. But a study by the Reserve Bank of India (RBI) has highlighted that farmers are getting only about a third of the final selling price of vegetables and fruits.

The bulk of the margin goes to the pockets of middlemen, retailers and others. Under its working paper series, the RBI recently uploaded a working paper titles, “Vegetables Inflation in India: A Study of Tomato, Onion and Potato (TOP)” on October 3.

As per RBI, the paper presents a novel framework for constructing monthly balance sheets to capture supply-demand dynamics for analysing determinants of prices of tomato, onion and potato (TOP) and for forecasting inflation.

The paper also assesses the value chains and estimates farmers’ share in the final consumer price of TOP. The major findings of the paper:

The farmers’ share in the consumer rupee is around 33 per cent for tomatoes, 36 per cent for onions and 37 per cent for potatoes.

The empirical analysis using Autoregressive Distributed Lag (ARDL) models suggests a significant negative relationship between monthly availability/ availability to usage ratio and consumer price index (CPI) of the three vegetables controlling for input costs, rainfall, and wages.

Seasonal Autoregressive Integrated Moving Average with Exogenous Variable (SARIMAX) models incorporating the balance sheet variables have a better forecasting performance over other models across different forecast horizons.