Food price rise

 MPost |  2015-12-15 21:25:31.0  |  New Delhi

Data released by the Ministry of  Commerce has detailed a surge in inflation based on the wholesale price index (WPI). In November WPI came in at - 1.99 percent, the highest level since January, compared with -3.81 percent in the preceding month. The spike in the WPI index mainly comes on account of higher prices of pulses and onions. More worryingly, however, the recent data released details a spike in overall food inflation from 2.4 percent in October to 5.2 percent in November. Although in the past thirteen months the WPI has indicated a deflationary trend, signals emanating from the food inflation figures are a cause for concern. Pulse prices shot up by 58.17 percent in November on a year-on-year basis, while onion prices rose by 53 percent and Vegetables by 14 percent. What should cause sleepless nights for the ruling NDA government is the persistent rise in food and vegetable prices in recent months. Moreover, despite plunging crude oil prices and a slowdown in global markets, food prices continue to rise. It is, therefore, amply clear that the rise in food prices is down to supply-side bottlenecks. This fact has not been lost on the Reserve Bank of India. Speaking to the media earlier this month, RBI Governor Raghuram Rajan said that the central bank will have to wait and assess the impact of the recent spurt in retail inflation driven by high food prices. What exacerbates the current situation is the increased incidence of drought in India. 

Last month, Telangana had declared drought in 231 sub-districts spread across 10 districts. Suffice to say, it has become the ninth state in India to declare a drought, highlighting a growing agrarian crisis that could likely cause a fall in the production of pulses and vegetables that are all rain-fed crops. Apart from Telangana, Karnataka, Odisha, Maharashtra, Madhya Pradesh, Chhattisgarh, Jharkhand, Uttar Pradesh, and Andhra Pradesh have declared drought this year. A deficient northeast monsoon and lack of soil moisture have affected the sowing of wheat and pulses in the Rabi season. The July-September monsoon accounts for about 80 percent of India’s total rainfall and affects both summer and winter sowing. Moreover, about 2/3rd cultivated land in India is dependent on monsoons. Data published by the Centre last week showed that sowing for the Rabi crop is lagging by more than 18 percent. In the event of a failed winter crop, a majority of India’s farmers could witness its fourth consecutive crop failure. In a country, where 60 percent of the Indian workforce is dependent on agriculture, the possibility of a negative growth rate in agriculture is indeed scary. For the record, in 2014-15, the agricultural growth rate stood at a dismal 0.2 percent. Although India is food secure, what must worry the government is the lack of equitable distribution. 

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