Lower onion output prompts government procurement – Implications for investors


India’s kharif onion output for 2022-23 is expected to trail last year’s levels slightly. To stabilize domestic prices, the government will procure an additional 2 lakh tonnes for its buffer stock, taking the total onions procured to 7 lakh tonnes.

Analysis for a layman

Onion is an essential, price-sensitive kitchen staple. Lower seasonal output typically causes high volatility in retail prices. By buying from farmers directly and maintaining buffer stock, the government aims to calibrate market supplies and reduce inflationary pressures, especially when elections are nearing.

Lower onion output prompts government procurement

Original Analysis

The buildup of targeted onion procurement underscores the government’s inflation focus with polls nearing. While output trails last year marginally, maintaining adequate buffer levels prevents opportunistic price surges and volatility that disproportionately impact household budgets. It signals intent to closely monitor essential commodities. But buffer build up must factor in rising holding costs and avoid over-procurement that distorts exports competitiveness later.

Impact on Retail Investors

For investors, direct procurement interventions signal government’s willingness to absorb political risks to insulate consumers when inflation is high on priority. This provides stability to consumption-oriented sectors like FMCG, retail which face input pressures and demand risks. However, prolonged actions disturbing trade parity attract long-term risks when output rebounds. Investors need balanced positioning.

Impact on Industries

Agriculture and allied sector stocks gain from price support assurances helping rural incomes in an election year. But export competitiveness of agri commodities takes a hit. Also, extreme stock buildup risks temporary anomalies like an onion glut later. Overall, the move indicates inflation remains a key policy factor for 2023.

Companies that will gain

Dabur, Britannia, Adani Wilmar

Companies that will lose

Mahindra & Mahindra, Escorts


While onion output marginally lags last year, the government procurement underscores managing inflation expectations before elections. Investors can utilize the policy stability but shouldn’t extrapolate consumer sector optimism.


Bureau, ET. “Onion Production to be Lower, Govt to Procure Additional 2 L tonne: Secy.” Economic Times, 12 December

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