Food Inflations-The Real Problem of Common Man in India.
Dean Martin.C, Asst Professor in Commerce, PG Dept of Commerce & Management Studies, St. Thomas’ College, Thrissur
In simple terms inflation, or price rise is caused by too much money chasing too few goods, or, demand being more than supply. The free play of the twin market forces of demand and supply determine the price of any commodity or service. In a mixed economy like India, Government is also an important player in the market. Hence to search for the causes of inflation, becomes somewhat complex. The last couple of months witnessed a sudden and almost a run-away type of food inflation. The way the price of vegetables and other food items soared, it created doubts in the minds of the common people and the economists alike. Winter is generally the time when fruits & vegetables are at the lowest prices. This was not so this year. The prices were way above the expected normal. This happened in spite of the normal monsoon and average inflation in other sectors. It was the other way round this time. Inflation in the food sector spilled to other sectors causing the rise in overall inflation. The government and RBI are working on the lines of monetary regulations like change in the interest rates, CRR etc. But looking at the way the food prices are stuck at the higher side, don’t these monetary measures appear just temporary remedies? There are certain deeper, grass root causes which have to be actually tackled. India has come a long way in case of food grain productivity. There was a time when our Balance of payments, account was always weighed down by food grain imports and the debts incurred for these essential imports. It is not so anymore. We are self reliant now. In case of sugar, global prices are determined by the amount of India’s sugar production! States like Punjab, Haryana and Gujarat are doing well in the field of agriculture. Production may be slightly short of demand considering the huge population. Such inflation can be checked by importing. But our problem is actually the middlemen. There is a huge difference between the cost of production and the price the final consumer pays. The farmer gets a very small amount of this profit/difference of cost and final price. For example – If we are buying a vegetable for Rs. 40 per kg., the dealer at the wholesale market gets Rs. 10 per Kg., and the poor farmer gets a meager Rs. 3. Again this Rs. 40 too will differ depending on the locality it is being sold. Then there is always the problem of black marketing & illegal stocking of goods to get a higher price. So we actually need checks on the middlemen and the retailers. Secondly, the system of direct farm to shops has to be developed, so that the farmers are the real beneficiaries. This will also motivate the farmers to increase production. Wastage is another important avoidable problem, leading to shortage. Production we have raised. But so much is wasted because we still are a laggard when it comes to state of the art storage facilities. Even the government’s huge food buffer stock lies unused till it gets finally rotten. Why doesn’t the government release its buffer stock on time to check shortage and food inflation? Is the buffer stock merely for psychological security? The government has raised the support prices of some food items. This along with the rural employment schemes and high urban salaries has also infused excess money in the market causing the inflation. Lastly, does the government know or sincerely follow, what is happening to the prices which are subsidized or fixed by the government? There are cases where the inflation will not show in the Government statistics, but will certainly affect our household budget. As usual when the Union Budget is presented, all eyes will be on the Finance Minister and his speech will be...
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