Hindu editorial … June 30th
Spiralling food prices
Policymakers must guard against inflation to ensure sustainable growth
Indian households find themselves yet again struggling to cope with a sharp surge in the prices of essential kitchen staples — ranging from tomatoes, onions and potatoes to tur dal and rice. Tomato prices have more than doubled month-on-month with the all-India average retail price as on June 29 soaring to ₹53.59 a kilogram, from ₹24.37 on May 29, data from the Consumer Affairs Department’s Price Monitoring Division show. And while the rise in onion and potato prices over the same one-month period is a seemingly far more benign 7.5% and 4.5%, respectively, the overall trajectory in price gains across the wider food basket is symptomatic of the unsettling build-up of underlying inflation pressures in the economy. For instance, the price of tur dal, a key protein source in the diets of vegetarian households, continues to keep rising; it had climbed 7.8% month-on-month to ₹130.75 a kilogram on June 29, as per the government’s data. Official retail inflation data for May, released earlier this month, had shown that prices of pulses, which includes tur dal, had quickened by 128 basis points year-on-year to a 31-month high of 6.56%. The government’s imposition of stock limits on urad and tur on June 2 seems to have so far done little to cool price gains in lentils.
To be sure there is a seasonality component to the prices of farm produce and their supply is largely determined by factors including timing of the harvest and the prices prevailing at the mandis when the farmers transport their crop to the markets. Just last month, tomato growers in rural Maharashtra had dumped sizeable quantities of their produce on the roads after being offered unremunerative prices. However, prices of several of these food items, including tomatoes, are still substantially higher than even the same time last year with the modal daily weighted average arrival prices at the mandis as per the government’s agmarket website revealing tomato prices almost tripled year-on-year to ₹5,579 a quintal as on June 29. The same arrival price data show a 35% jump in tur dal and a 19% increase in common paddy (rice). With the monsoon rains 13% in deficit so far this year, and the outlook for spatial and temporal distribution in the coming months clouded with uncertainty by the El Niño, there is a real risk that food prices could cause retail inflation to accelerate again. Policymakers need to walk the talk and retain laser focus on taming inflation. After all, as the Reserve Bank of India’s economists noted in the latest bulletin, “the path to high but sustainable inclusive growth has to be paved by price stability”.
Paraphrased and simplified version …
Surging food prices: A warning bell for growth
Time for policy makers to rein in inflation, so that growth momentum doesn’t lose steam
Indian households find themselves yet again struggling to cope with a sharp surge in the prices of essential kitchen staples — ranging from tomatoes, onions and potatoes to tur dal and rice.
Prices of everday-needs of Indian households, such as tomatoes, onions, potatos , tur dal etc. have soard dangerously in recent days stretching the budget of low and medium income families in India. Tomato prices have jumped to Rs.53 a kg – a 100% jumps over the level of a month ago. The Price Monitoring Division of the Department of Consumer Affairs has collected similar disturbing data in respect of quite a few daily-use items. Although the rise in prices of potatoes and onion are moderate, the inflationary pressure is visible across most item people consume as food.
Tur Dal, an item that provides protein for vegetarians, has touched Rs.108.75 a kilo registering a 7.8% month-on-month rise. No doubt, the government has tried to contain such rise in prices by fixing a limit to the maximum stock whole-sellers can hold at any point of time. This anti-hoarding measure, sadly, has yielded little adding to the woes of low and medium income families.
It has to kept in mind that the prices of many agricultural items fluctuate greatly depending on the amount of the produce that farmers bring to the wholesale centers, known as mandis. If, the arrival of any item increases shaply, its prices fall, and vice versa. This explains why tomato was selling so cheap in Maharashtra and elsewhere just weeks ago. The same price has now risen sky-high causing distress around the country. It’s difficult to understand why tomato prices have risen so alarmingly, surpassing the seasonal level of the previous years. No doubt, less arrival of tomatoes at the wholesale centers does not fully explain the sharpness of the rise. The price of paddy, too, has risen by a big 19%. Obviously, inflationary pressures are playing a role.
Monsoon rains, so far, are below average, and thanks to the El Nino effect, this year’s total rainfall could be in the deficit side. If this happens, paddy harvest will be less, and in turn, market prices of paddy / rice could increase. Policymakers have to pull up their socks to monitor the prices closely and take remedial measures to keep the prices under check. need to walk the talk and retain laser focus on taming inflation. The saintly voices in RBI rightly told that “the path to high but sustainable inclusive growth has to be paved by price stability”.