Indias food inflation problem.

Its winter and the way food prices have been climbing in recent times warrants panic in govt circles.  One wonders what the price of food articles will be in the lean period ie summer. One needs to worry about the urban lower /middle middle class, not just the poor as many food article prices are going beyond peoples reach, and the onion crises that  caused the fall of the BJP govt seems tiny in comparison to the steep overall price increase.

One wonders about where all the record breaking procurement for PDS in the previous yr has disappeared as the price of every food item has tripled in some cases at the retail end. People are already sniffing a huge scam in the sugar export and import done by the agri ministry, but one thing is for certain , the govt has been incompetent and failed massively to control prices. The way things stand this is sure to start effecting manufacturing through increasing labor and input costs.

Food prices in the week-ended November 21 have shot up by 17.47% from their year-ago levels. Week on week, they rose by over 1% pushed largely by a 12% rise in onion prices. This is the sharpest rise in 11 years — that is since 1998.

some experts say that while poor kharif harvest explains the 13% year on year jump in cereals and the 3% jump in pulses, they can’t explain the 100% rise in potato prices, the 30% jump in onion prices and the 29% jump in eggs, meat and fish.

Chances are that higher minimum support price (MSP) and programmes like the NREGS are also responsible. More importantly the high food inflation coupled with the 7.9% GDP growth led to two key policy makers hinting that RBI may have to resort to rate action.

CNBC

But the fact is that the govt is looking towards the RBI to deal with it, when it knows fully well that monetary measures can do little to sort out this hot potato, something that the current gov Subba Rao has repeated more than once.

Politicians including the agri minister and finance minister  freight helplessness, while outwardly showing worry and have in typical upa style  postponed the fall in agri commodity prices to post rabi crop.

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2 thoughts on “Indias food inflation problem.

  1. http://web.worldbank.org/WBSITE/EXTERNAL/COUNTRIES/SOUTHASIAEXT/0,,contentMDK:20916955~pagePK:146736~piPK:146830~theSitePK:223547,00.html

    now in a country where there are more malnourished and underweight children than the entire sub-sahara region put together.. rising employment and prosperity (partly due to NREGS) will only cause increase in food consumption.

    I have written a series of articles on employment guarentee scheme. if the food inflation is due to the starving people getting 2 square meals then whats the harm.

    1. Well there is no harm when there is plenty of food-stock, the system works efficiently and things are well managed.
      But are they?
      The drought situation coupled with high deficit , and very poor food stock management (corruption), and the wastage and leakage that go with the pds system mean less food for common man .. ie more inflation and less demand from the main drivers of the economy who tend to spend most of their income on the basics say the poor the lower middle class and middle middle class.Thus demand has seen a big crash , as the current figures show that growth has been mainly due to govt stimulus as private consumption has gone down.
      Plus there is massive corruption in nrega, wherein there is more book progress than real progress and money reaches dubai and swiss and camen island banks instead of the real poor. A percentage of increase in prices may be trader or mandi manipulator driven thanks to the roundabout procurement system and the msps (as i had already mentioned int the post upa= food inflation). Thus not just rice but the local grains like millet etc are also getting expensive … therefore more borderline poor will get poorer and people on the fringes will be worse off , is what i assume.

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