Saturday, October 27, 2012

INFLATION: FOODGRAINS

For the middle class families, rising food prices have proved to be killing and the steps by government are a big joke, say Vikas Kumar and Niharika Patra

Those are not just the normal day to day food items that are wreaking havoc on middle-class family budgets. Thanks to the largesse doled out by the Sixth Pay Commission, the amount of money they have to pay as school fees for their children has virtually doubled – often with retrospective effect. And unlike their luckier ‘government employee’ counterparts, an overwhelming majority of those working in the private sector have not seen a pay hike for more than a year. Says Rajarshi, “I have two sons and their school fees have now doubled. I don’t know how will I pay all this.” Rajarshi and her husband really don’t know how to tackle this situation. So, middle-class Indians like Sadhna and Rajarshi who used to save about Rs.5,000 per month have now seen their savings dwindle to literally nothing.

There is more bad news for them in store with the monsoon being far from normal. Says JP Malik, Department of Economic Analysis and Policy at RBI, “It is simple economics. The problem is because of the supply-demand gap which has happened because of the trouble in monsoons. Pulses and cereals have suffered more because they are more dependent on monsoon water”. But poor monsoons alone cannot be blamed for the incredible rise in prices. There is something rotten in the supply chain related to food products in the country. The farmer in the village still gets less than Rs.10 for every kg of cauliflower that he can harvest and sell. By the time you buy it from the market, it costs at least Rs.80 per kg. This is a clear sign that the trader and the middleman are making hay while the farmer as well as the consumer suffer. Add to that the complete absence of modern cold storages in rural areas despite many pious announcements from myriad policy makers.


Source : IIPM Editorial, 2012.

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