Any discussion on inflation these days evokes strong reactions. Several suggestions are floating around on what should be done to contain it. While other countries groan when ou prices f sflare up, food inflation ap- parently hurts l Indians more, espe y the poor. For some reason, it isbelieved that always be low
Is this a case of being too optimistic, given that there is another view that higher food prices benefit benefit farmers be- cause their income increases? Often, when the p e prices of vegetables and pul- ses increase, the difference between wholesale and retail prices: narrows down, and the farmer benefits. down,
and the I Can anything be done to bring down Pould not be paying more even if far- if it is accepted that consumers mers benefit? Let’s look at the recent dostowed the l policies to understand the issue.
On July 20, India imposed a ban on the export of non-basmati rice to the export of non-l control rising domestic prices. It was only last week that it allowed traders to ship out their non-basmati white rice cargoes sitting at ports due to the sudden ban. A similar ban was impo- sed on wheat last year. Such steps may look effective for supply augmentati- on but may not serve much purpose considering FCI’s quantum of buffer stock of grains.
â–ºGrain stocks are usually released through open market sales, as has been done this year too. But this does not help because often the quality is not ofacceptable standards. While lower- quality wheat can find buyers from the informal food processing industry, households are more discerning.
Stock limits are also imposed to de- ter hoarding. This has not worked, as not hoard one cannot perishables for 1 s for long. In the case of pulses, the impact is minimal since there is no widespread hoarding. Also, most crops, pulses, are grown one , especially are grown once a year but are available round the year. This is done by traders who procure, store and distribute them, and bear the holding cost.have become fuzzy as the produce has to be stored up by someone, which could be FCI trade.Whenever there is a shortage, the import route is also considered. This year, tomatoes have been imported from Nepal. India has told exporters of pulses in Mozambique that it will import tur dal and urad dal withoutany quantity restrictions until March 2024. But the problem is that all im- ports go through a tendering process, and by the time they come to the ports, the problem could be over. Also, whenIndia imports, prices in source count- ries flare up, given the quantity requi- red. Incidentally, tomato prices have started coming down in India.
s sold Some state governments tomatoes at lower prices. Such actions have a good headline impact, but one cannot tackle the shortage. This is be Scrementa cause all states cannot do the same, given the and logistical Further, one cannot cover challenges. Further, a fraction of the populati- more than a fr on, and such steps can generated India imports, prices in source count- ries flare up, given the quantity requi- red. Incidentally, tomato prices have started coming down in India.
s sold Some state governments tomatoes at lower prices. Such actions have a good headline impact, but one cannot tackle the shortage. This is be Sacramento cause all states cannot do the same, given the and logistical Further, one cannot cover challenges. Further, a fraction of the populati- more than a fr on, and such steps canlast weapon being fired across the globe central is tightening monetary po- licies. All central banks are fighting inflation by increasing interest rates. Everyone agrees that raising interest rates cannot bring dowoes. However, t bring down the prices of onion, pulses and tomatoes. central banks can maintain the rol interest rate through these measures.
Inflation is part of the ecosystem. There will be phases when prices go up. Such ctural products are invol s will benefit farmers when a ved, and mine owners when metal or oil prices go up. Gol can act when pri- ces are administered and, hence, dis- torted, as is the case with fuel. But when it comes to farm products, the only solution is to wait for the tide to pass, and when the new and when the new the new harvest comes in, prices tend to cool down.
This has happened in the past, too, when we had tomato, onion and potato shocks. When imports are an integral pply like edible oils, global part of supply prices will have a decisive say as we are price taker: Working on the fact that overall inflation will always be within the range of 2-4% and that food inflation is within the purview of the g authorities may not always be the case. That’s not how the world works.