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Why make public shed onion tears?

The steep inflation in Wholesale Price Index (WPI), pushing up the prices of essential commodities, is public menace that needs to be tackled soon. Soaring food prices are already making the citizens shed onion tears, as it were, and after a brief respite, the prices of important edible items, particularly those of onions, have skyrocketed, ostensibly following an acute shortage in supply. In the national capital alone, onion prices have breached the Rs 80 mark, going up by Rs 10 in a few days, while the prices in other metropolitan cities such as Mumbai and Patna are equally high. While fuel price hike and rain in western India have contributed to the steep rise, it has horribly impacted the consumers, given that onion is practically a staple food item in every household. Moreover, the WPI inflation for the month of August has been at a six-month high and this is rightly touted to be a big worry for the new RBI governor Raghuram Rajan, who has a tough task ahead of him in balancing out protecting the Rupee from further fall, while also trying to control the ceaseless price rise and falling aggregate demand in the policy stance. Thus, while Rajan is staring at a vicious cycle comprising rising food prices, falling rupee value against the US dollar and the falling aggregate demand, the state governments are being suspected of conniving to push up the WPI, thus wreaking havoc on the citizen consumers across the nation.

    With the central government all set to withdraw diesel subsidy to bulk consumers of state transport corporations, the food prices are likely to scale up further. The WPI data for August 2013 reveals that primary articles index with a weight of around 20 per cent in the index rose 11.72 per cent in August and food articles with a weight of 14 per cent in the primary article index rose 18.8 per cent. Data also shows that vegetable prices have risen by more than 100 per cent since March 2103 and despite having a lower weight of around 3.5 per cent in the index, the veggie price rise has resulted in steep hike in primary articles index. Moreover, in a glaring setback, the price indiz for manufactured products rose by a mere 1.9 per cent in August, in striking contrast with the prices of essential goods, particularly the food items. This is bound to hit the poor the hardest and even though food security scheme has been rolled out in the Congress-ruled states, the central government project only takes care of the food grains, thus leaving vegetables beyond the reach of not just the poor, but pretty much also the lower middle classes. In this context, the government assurances that the prices are going to come down and stabilise in a couple of weeks ring hollow, given that the minimum support price, transportation costs and a shaky market are likely to drive up the prices in the near future. And even though the markets seem to have reacted well to the new chief of RBI, Rjan’s monetary policy would have to stand the litmus test of controling inflation and boost a stagnating economy, by bringing in rate cuts to facilitate long term FIIs, a formidable feat to say the least, given the domestic situation that’s bogged down by tapering growth and gaping current account deficit.           

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