Check Inflation Now

With no care from the government prices of essential commodities are spiraling. Naturally other costs will jack up with the growing inflation. Travel, health, education and other crucial service charges will go up. It seems that the government is sleeping over the exploding inflation. This high level inflation will have spill over effect on the society. Checking hoarding, making available essentials at moderate prices, liberal import of food items can moderate the rising prices. This must be done at the earliest to check the social unrest.

Times of India writes (10 November 2009)

Despite overall inflation at a non-threatening 1.5 per cent, food prices have risen 13.4 per cent in the past one year. If a dry statistic has no
power to pinch, the same can’t be said of actual prices of potatoes, onions and pulses. These have zoomed north, with prices of onions and potatoes spiking by 50-100 per cent, and pulses by over 23 per cent on average. Worse, it seems there’ll be no immediate let-up. The agriculture minister admits prices could remain high till the rabi crop’s harvesting. End-2009 is the Planning Commission’s more hopeful timeframe for relief.

The capricious monsoon drought preceding floods has hit kharif production, which could end up over 21 million tonnes short. Output of rice and coarse cereals is expected to sag. What hope is the government holding out? One, due to late rains, larger areas cultivated for wheat, rice, pulses, oilseeds and sugarcane should boost the rabi yield, compensating for the kharif shortfall. Two, there’s enough foodgrain stocks to keep the PDS ticking, and enough foreign exchange reserves for foodgrain and oilseed imports if required. To be fair, the UPA’s okay to rice imports and scrapping of import duty on rice were forward-looking policy decisions.

However, there’s no insulating the rural and urban poor or the middle class from spiralling vegetable prices. It’s in such situations that our ramshackle storage and transport system for perishables stands exposed. That huge quantities of fruits, vegetables and grains go waste every year is especially galling given today’s soaring prices. Also, despite healthy foodgrain stocks, there are official concerns about a demand-supply mismatch. This gap can worsen unless the PDS’s notorious leakages are plugged. More, foodgrain should be released into the open market to dampen inflation.

This year’s lesson highlights the issue of monsoon preparedness through improved forecasting and specific strategies for demarcated agro-climatic zones. But even beyond that, agriculture isn’t growing according to potential. It suffers structural anomalies impinging on food production, not least because only 40 per cent of arable land is irrigated. Not only must irrigation cover increase, it must be more innovative from the point of view of water conservation. Efficient capital deployment and use of technology require average farm size to increase. On the distribution side, we need boosted investment in warehousing and integrated cold chains, removal of middlemen in transactions and greater marketing opportunities for farmers through liberalised retail. Finally, reform is in order of archaic rules governing inter-state movement and marketing of farm products.

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