The Economic Survey 2024-25 has said retail onion prices witnessed a significant surge in 2024, surpassing ₹60 per kg in October-November. The Survey highlights that onion prices remain elevated, reflecting growing concerns over inflationary pressures, supply chain disruptions, and increased demand.

An analysis of onion price trends from 2022 to 2024 indicates a consistent pattern of price hikes in the latter half of each year. In 2022, prices remained stable, fluctuating at ₹20-30 per kg, with no major spikes. While in 2023 prices started rising from May, peaking at ₹50-55 per kg from August to November, before declining slightly in December.

In 2024, the price surge has been more pronounced, with prices rising earlier (May-June) and more sharply than in 2023. By October-November, prices exceeded ₹60 per kg, indicating stronger inflationary pressures than in previous years. While a slight decline was observed in December, prices remain significantly higher.

Rise in inflation   

“The inflationary pressures in onion remained firm in FY24 and the current year, despite prompt measures by the government to contain prices due to constrained supply resulting from reduced production,” the survey said.

Onions are grown in both the kharif and rabi seasons, with the latter making up around 70 per cent of the total annual production.

Fresh onions generally last 2-3 months when stored in a cool, dry, and well-ventilated place, with a longer shelf life in a dehumidified environment. Thus, onions produced in one year — specifically rabi onions harvested from March onwards — are typically available for consumption in the following year, influencing inflation dynamics in that year.

The lower production in 2022-23 and 2023-24 led to inflationary pressures in onions for FY24 and FY25 (April-December)

Onion prices tend to increase from October to December, representing a lean season for onion production. India’s status as major producer and consumer of onion and tomato significantly limits the potential to import to correct seasonal supply-and-demand imbalances.

India’s contribution

Given that India and China contribute about half of the total production of onion, the import options for India during periods of demand-supply imbalances are quite limited. The next eight major producing countries only contribute around 18 per cent of the production.

The Survey said onion and tomato prices are affected by the decline in production, partly due to extreme weather; uneven monsoon-induced supply disruptions in certain regions caused price pressures, mainly in tomatoes and onions, contributing to higher inflation rates in vegetables and overall food inflation.

“When we exclude the three most price-sensitive vegetables (tomato, onion and potato (TOP)) from the CPI basket, the average food inflation rate in FY25 (April-December) was 6.5 per cent, which is 1.9 per cent lower than the current food inflation. Similarly, average headline inflation is 4.2 per cent when excluding TOP, which is 0.7 per cent lower than the current headline inflation” the Survey said.

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