|
| Dealing with food inflation | | Better supply-side responses could`ve mitigated the problem |
| Business Standard / New Delhi Aug 12, 2009, 00:50 IST |
|
Double-digit inflation may be a thing of the past, with the wholesale price index now in negative terrain, but that brings little relief to most people when food price inflation remains untamed. The prices of quite a few essential food items, notably pulses, sugar, vegetables and fruits, have been rising quite sharply, even doubling in one year in some cases. A study released recently by the Associated Chamber of Commerce and Industry (Assocham) reported that households have curtailed their intake of dals, a key source of protein, due to the unaffordable prices. The per capita consumption of pulses has plummeted to a mere 11 kg this year, less than half of what it was in the 1960s (27 kg). Indeed, Assocham projects it to drop further to 9 kg in the later part of the year as pulse prices are unlikely to soften. The scenario for vegetables and fruits is no different, with some of them selling at prices that are multiples of the levels last year. And sugar — which may not fully qualify to be viewed as an essential item but is consumed by every household — has seen a sharp upswing in prices in recent weeks, with worse to come on expectations of a cane crop shortfall and a lack of imports on account of high global prices.
The causes of the price spirals differ for different commodities, but some factors are common. The monsoon failure is one. But that alone cannot fully explain the current level of food inflation which is reckoned at 9.5 per cent, against just 2.3 per cent during a similar, if not worse, drought scenario in 2002. That suggests the government has to share some of the responsibility for mismanaging supply. The emphasis on restrictive trade policies, for instance, may have proved counter-productive. Instead of releasing supplies into the market through the unloading of stocks, such policies have deterred the trade from responding to supply-demand dynamics and thereby steadying prices.
In pulses, there are short- as well as long-term factors at work. Availability has lagged behind rapidly growing demand for years on end, because domestic production has failed to rise in tandem with the growth in demand, and supplies in the international market are limited. Little has been done in all these years to boost pulse output. The resulting supply-demand imbalance gets accentuated in a drought scenario, because most pulses are grown in the rainfed areas. In the case of sugar, too, the upsurge in prices could be seen coming, because of shrinking of cane acreage. Yet no effort was made to ensure adequate supplies through imports that beat the price spiral. The signals of a developing shortage of sugar in India, one of the world’s largest consumers, have sent international prices soaring, making imports unviable. Vegetables and fruits, meanwhile, have been suffering from logistics and marketing constraints which amplify the impact of seasonal factors. The absence of organised retail chains is keenly felt in such a situation. The need is to address these diverse supply-side constraints through long-term policies and timely corrective action.
|
|
|
|
|
|
|
|
|
|
 Read Business news in |  |
|
|
|
|
|
|
Advertisements |
|
|
|
|
|
|
|
|
|
|
Content Guide
