Pinching food inflation
High food prices and continued slow GDP growth rate have added to the economic woes pervasive in India
This week if the price of onions didn't bring tears to your eyes, nothing else would. Scorching price charts at Rs 110-120 a kilogram, the humble yet essential vegetable that forms the base for almost all Indian cooking, burnt a hole in the pockets of the common man. As precious as gold and cash, thieves even stole 40 tonnes of the vegetable in Madhya Pradesh!
And it's not just the onion, come winter, and the price of pulses and winter vegetables have been on an upward spiral. With an extended monsoon and delayed winter this year, prices of several vegetables are skyrocketing. Green peas, ginger, yam, garlic, fenugreek leaves, carrot, tomatoes, little gourd, etc., are all on the rise. As if the slowing Indian economy needed anything else to make its run even worse, even prices of petrol and diesel are on the upward trajectory. Stuttering at a 26-quarter low of 4.5 per cent GDP growth in the second quarter, the fears of economic growth rate plummeting further, looms large. Even as the government vehemently denies signs of recession, the numbers tell a sordid tale — that of the slowest growth rate in six years. Dr Manmohan Singh has cautioned to brace for impending stagflation, which is continued high inflation coupled with high joblessness and stagnant demand.
The government too seems to be running out of options to rejuvenate growth and induce greater consumer demand. The last few months showcased dull car sales, contracting factory outputs and sluggish exports. Government sops such as reduction of corporate tax, a special real estate fund, merging of banks and ambitious disinvestment plans have failed to resuscitate the Indian economy. The slowdown that hit the non-banking financial companies (NBFCs) or 'shadow banks' further crippled small businesses. Aggressive e-commerce platforms with their magnanimous discounts did the rest. Even festival time could not spread cheer, and the mood remained less than buoyant among consumers.
The fastest-growing economy in the world now stares at a few quarters (at least) of uncertainty. Difficult times lie ahead as the country prepares to feel the real impact of a global slowdown, disastrous domestic policy moves such as demonetisation and international trade wars. News reports suggest that most worrying for economists is the ever-increasing food inflation. Pork in China, onions in India, and exorbitant food inflation rates in Turkey and Africa have economists worried about emerging nations. Data from the United Nations depicts that global food prices increased at a quicker rate this October than in the last two years.
Of all the economic crisis, food inflation hits home the most as it stretches the monthly spends of consumers. For the common man, high food inflation comes as further bad news even as his fortunes continue to reel in the dwindling economy. And it's when one can't even afford to eat, is when you know that the situation is quickly turning from bleak to grim.
All eyes are now once again looking towards the Reserve Bank of India and its largesse in cutting interest rates. The
Central bank has already cut interest rates by 135 basis points this year – the lowest since 2009 – but one more is slated to come in next week on December 5.
The dream to turn into a USD 5 trillion economy seems like a distant dream with more immediate worries creasing the country's forehead.
Shutapa Paul is an author and media entrepreneur. Views expressed are strictly personal
