Soaring Onion Prices Send India's Inflation to Six-month High

A waiter carries plates of food for customers at the Britannia and Co. restaurant in Mumbai. In August, the cost of onions was 245 percent higher than a year earlier, while other vegetables shot up 77 percent, driving headline inflation to a six-month high. Onion prices have risen even further in September, prompting the government to take steps to limit exports.

Customers talk while having their lunch at the Britannia and Co. restaurant in Mumbai. In Britannia, the pinch is being felt by customers who include employees of the Reserve Bank, who drop by to lunch on steaming plates of its famous Parsi berry pulav rice. "Instead of one person eating one plate, two people are splitting. And three people are dividing two plates," said Boman Kohinoor, the 91-year-old co-owner of the restaurant.

A vendor arranges a price tag over a sack filled with sugar at a wholesale vegetable market in the western Indian city of Ahmedabad. In August, the cost of onions was 245 percent higher than a year earlier, while other vegetables shot up 77 percent, driving headline inflation to a six-month high. Onion prices have risen even further in September, prompting the government to take steps to limit exports.

Vendors sort onions at a wholesale vegetable market in Kolkata. A former IMF chief economist, Rajan took over at the RBI on Sept. 4 in the middle of India's worst economic crisis in 20 years. He will announce his first monetary policy review on Friday.

Boman Kohinoor (3rd L), the 91-year-old co-owner of the Britannia and Co. restaurant, waits for customers in Mumbai. The restaurant raised prices on its menu by between 30 and 50 rupees ($0.50-$0.80) earlier this year -- a fragrant plate of rice-based chicken biryani now costs 350 rupees -- and Kohinoor said the soaring costs of ingredients may force him to hike prices again by April.

An employee looks out of the Britannia and Co. restaurant in Mumbai. With overall food prices up an annual 18 percent last month, Kohinoor's new neighbour at the Reserve Bank will probably be careful not to stoke inflation in other areas, despite calls from industry to cut interest rates and lower borrowing costs.

Customers eat lunch at the Britannia and Co. restaurant in Mumbai. Erratic prices for perishable goods are routine in India, partly because the majority of farms depend on the variable monsoon for rains. This year, a drought followed by too-heavy rain affected supplies. Consumers are also hostage to inadequate storage facilities and transport bottlenecks - that together cause up to 30 percent of fresh produce to rot before it reaches the market - and a distribution network in which many layers of middlemen take cuts, forcing prices higher.

Boman Kohinoor (C), the 91-year-old co-owner of the Britannia and Co. restaurant, speaks to customers before taking down their food order, in Mumbai. The U.S. Federal Reserve's surprise decision on Wednesday not to wind down its massive monetary stimulus just yet helped the rupee to a one-month high on Thursday, so inflation may have now moved up on his list of priorities.