Within just 2 months, the prices of food had rocketed from inflation of 12.6% to 19.05%. The inflation figures are those of items that are used in raw form. When we look into the matter of items like sugar, oil, the extent of price rise is even starker. This issue has also come to the fore with the introduction of the new weekly reporting of WPI for primary articles and fuel group. Previously it was hidden by the focus on increase in price levels where manufacturers had exerted a greater impact.
The main reason of this inflation is not the monetary overheating of the economy but rather, the supply side failures. While monsoon wrecked havoc and unpredictability, the authorities were more than satisfied with mere statements of ample food reserves while the weekly inflation rates counter argued.
October and november are the months in the country when new crops arrive and prices fall due to ample supply, but this year the disappointing monsoon spoiled the party for Kharif crops and the impact on price was predictable.
The Govt. needs to import food articles in the short run. This can be offered for crops like rice. The wheat harvest is a few months away, raising hopes of good crop; but the vegetables cannot be dealt with in a short time and we have to wait for the new crops to arrive.
i think its a good view on the food price hike. one more reason i would like to add is the Private company hoarding of food grains.
ReplyDeletecompanies like ITC, Cargill get cheap crops from farmers and start hoarding these in theor stocks, resulting in supply shortage in the consumer market; so obviously the prices will rise.
One of the major issues for supply constraints is the low level of productivity of food grains in India.The farmers are not motivated to produce more as it is the middleman who walk away with hefty profits.Also in India. PDS is extremely bad.The amount of wastage on food grains due to faulty PDS is amongst the highest in the world.I feel this is a huge area of improvement.The farmers could be motivated by increasing the MSP and reducing the role of middleman in agriculture.Public - private partnership can be a good solution to this proble.We have examples like ITC e-choupal and HUL's Project Shakti.Its high time that the government steps in and addressed these issue otherwise onions, potatoes, rice and wheat would become a luxury rather that basic articles for poor people.
ReplyDeleteThere was an article in Times of India yesterday (17/12/2009) on the huge profit margins being made be the retailers on the food prices. There are mark-ups of around 400% being imposed by retailers on some commodities. This could well be a pricing problem where the inaction on the part of the govt. has encouraged profiteering by retailers.
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