Food prices mock India's scorching growth
By Raja Murthy
MUMBAI - A surge in food prices at rates unseen for the past 11 years is
sending Prime Minister Manmohan Singh's government scurrying for cover as the
decade-ending festive season becomes a grim belt-tightener for millions of
Indian families.
The Lok Sabha, the 552-member directly elected Lower House of parliament, was
adjourned on December 17 after opposition and ruling coalition politicians
rowdily squabbled over food inflation climbing at nearly 20%, the highest among
developing countries.
Food price inflation rose 19.95% for the week ending December 2 from the
corresponding period last year. While the numbers men call this the fastest
food price inflation in 11 years, the fuss over
food may be the biggest in the past three decades, coming after the weakest
monsoon since 1972.
More than the fickle rain gods have helped to create this crisis, which is
reaching boiling point after heating up over the past two years, starting with
record high onion prices in 2007 (see
Onion prices bring tears to India's eyes, February 14, 2007.)
Besides crops loss from drought and unseasonal rains, black-market hoarders and
other profiteers are being accused of worsening the shortage. An increasing
corporate presence in agriculture, speculation in commodity trading and
agriculture exporters also feature high on the blame list.
Reports abound of middlemen marking up agriculture produce prices by as much as
300% to 400% between the price farmers get and the price consumers pay. For
instance, a farmer in Nasik district, 180 kilometers from Mumbai, gets 3 rupees
(6 US cents) for a kilogram of onions, while one onion sells at a retail price
of 20 to 24 rupees. Politicians, police and local bureaucrats are said to be in
league with the black marketeers.
Prices of other key kitchen stocks such as sugar are up 100% this December from
last year. In Mumbai, the financial capital, onion prices are 80% higher and
potatoes 67% up on last year.
That raises fear among politicians, who well know that while complex nuclear
pacts and climate deals may pass public patience, pricey potatoes and onions
can bring down governments.
Soaring onion prices cost the ruling Bharatiya Janata Party the state
government elections in Rajasthan and Delhi in 1998, and hammered the now dead
Janata Party in the 1980 general elections. The Congress party-led United
Progressive Alliance could join the onion backlash list if it ignores the clout
the pungent, bulbous tastemaker wields in Indian politics.
India regularly sees political and market trouble linked to rising prices and
shortages of one or two key commodities, such as wheat, rice, sugar, potatoes,
onions, vegetables and fruits. But it is rare that prices surge across most
food items, as they are now. "When soaring vegetable prices enter cocktail
circuit conversation, you know things are getting really bad," the Mumbai
weekend publication Crest sardonically observed.
"I have not seen a price rise like this in the 10 years that I have been here",
says Santosh Khot, a vegetable vendor at the 138-year old Crawford Market in
Mumbai. The red-stone Norman architecture building, one of the most famous
markets in India, was not quite buzzing and bustling late on Friday evening.
Shops selling glittering Christmas decorations at the Crawford Market entrance
had only a few milling customers, as did the usual regular shops selling
vegetables, fruit, groceries, smuggled chocolates and cheese.
Along the dimly lit corridors of the Victorian-era market, Irfan Hussein was
perched on a high wooden platform behind mounds of onions and garlic. "Costs of
transportation and taxes have also contributed to the price rise," the elderly
merchant told Asia Times Online, as a customer winced on hearing the price of
garlic (140 rupees, or US$3, per kilogram). "Besides the sales and service tax,
the overhead costs of shop rent, electricity and labor have also gone up."
The poor are the worst hit, says Hussein, who has been a Crawford Market
merchant the past 35 years. "Three meals a day for a person would now cost at
least 100 rupees," he estimates. The newly revised government-fixed minimum
wages per day is 100 rupees, from the earlier 80 rupees, which means workers on
daily wages can barely feed their families.
Street-food prices in Mumbai have gone up over 30%. A regular lunch favorite
such as the "rice plate" or thali, for instance, in roadside eateries
now costs 40 rupees from the earlier 30 rupees for a plate of four chapatis
(thin leavened bread), a handful of rice, watery lentils, a small helping of a
vegetable dish and a dash of pickles. The less fortunate and less finicky could
survive on tea (5 rupees a cup) and bananas that sell for 2 rupees each.
Such soaring food prices are a bitter reality check for a government happy with
the way the US$1.25 trillion Indian economy raced along at a 7.9 % growth rate
in the three months through September, its quickest gallop in 18 months. The
second-highest gross domestic growth rate in the world may impress foreign
investors, but it cuts little ice with the more crucial domestic audience whose
home budgets are reeling.
Premier Manmohan, a professional economist, and his cabinet colleagues are yet
to display any out-of-the-box thinking to solve the food price crisis. Finance
Minister Pranab Mukherjee said on December 18 that the government was looking
to increase imports, though India is the world's fourth-largest producer of
vegetables and fruit.
Eat more wheat and less rice, urged a more desperate West Bengal state
government in the eastern region, where rice is the staple diet. West Bengal,
the largest rice-growing state in India, faces a rice shortfall of 565,000
tonnes this year.
A worried Reserve Bank of India is considering increasing lending rates to curb
inflation, while a parliamentary standing committee on finance asked the
government to develop a price index exclusively for essential food items such
as rice, wheat, pulses, vegetables, sugar and edible oils. Food items in the
Wholesale Price Index contributed to a 135.6% increase this year over 2008.
More essentially, the government needs to address agriculture basics such as
improving and increasing storage facilities of food stocks.
Subodh Kant Sahay, Minister of Food Processing Industries, told parliament in
2008 that the country annually lost US$ 12.41 billion worth of harvested
produce due to inadequate post-harvest infrastructure, cold chains,
transportation and proper storage facilities.
The stock of rice and wheat held by various central and state agencies has not
changed much in nearly two decades. According to Agriculture Ministry
statistics, governmental agencies held a total of 19.13 million tonnes of rice
and wheat in 1991, and 19.18 million tonnes of rice and wheat 17 years later in
2008. The rain gods and global warming devils won't be inclined to take credit
for the ongoing food mess.
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