Analysis
Household Budgets Zoom
as High Prices Pinch Indians
New Delhi
Just a month ago, Sujata Jha, a homemaker, was buying bananas for Rs.24 a dozen. But today, she reluctantly doles out Rs.36 for what is considered the staple fruit of an average Indian. With prices hitting the roof across the country, she is not alone in feeling the pinch.
As the world battles to rein in prices, with even food riots in some countries like Haiti, India too is waging a war against inflation with economists seeing little respite in the short-term and policy makers admitting that food shortage is making damage control a difficult task.
From the poor in the rural settings of Punjab to the affluent in Mumbai, all are having to adjust their budgets to fight the price rise that has pushed the inflation rate to the highest levels in 40 months at over seven percent and sharply higher than the tolerance level of five percent set by the central bank.
"Usually, vegetables are reasonable around this time, but not this year. I am buying green peas at Rs.25 per kg now. It was just Rs.10 per kg last year. My budget has gone for a six," rued Rintu Roy, a homemaker in Vasai, a suburb in Mumbai.
Nirmala, a housemaid in Chennai who hails from Kerala, said: "Tapioca is our staple food. We used to buy it for Rs.8 a kg. Now it is Rs.15 a kg. How can I buy it for my five-member family?"
"My income is the same but expenses have shot up," she said.
In this backdrop what do official statistics say? In three months alone, wholesale prices of bananas have shot up 18 percent, fruits and vegetables are dearer by 14 percent, lentils are costlier by eight percent and edible oils cost six percent more.
Since the statistics are based on provisional data, there is an underlying fear that the actual quantum of price rise may have been higher. For the week ended Feb 9, for example, the annual inflation rate based on provisional data was 4.35 percent, while final figures indicated a much higher rate, 4.98 percent.
"With the cost of living going up by 50 percent a month, spending on household goods like appliances and fixtures has come down," said Namita Kulkarni, project leader at the Bangalore-based software and outsourcing major Mphasis-EDS India.
"For instance, it is a year since we bought a flat, but we still don't have the curtains. We have postponed any further spending on our flat by a year as we have to first pay the home loan amount," she added.
To top it all, buffer stocks of food grains with government agencies are at precariously low levels and fresh procurement in important markets like Punjab and Haryana has been slow, giving little elbowroom to policymakers.
In Punjab, the six major procurement agencies, including the central government-run Food Corporation of India, have procured just over one-fourths of the total expected target this season.
"Our agencies have procured 2.77 million tonnes of wheat so far. Though the procurement started April 1, much of the wheat started arriving only in the past week," Punjab's Food and Supplies Director S.P. Singh told IANS.
Amid such a situation, global agencies like the International Monetary Fund have warned that social unrest due to high food prices seen in countries like Egypt, the Philippines, Indonesia and Haiti could spread to other countries.
"If we want to avoid this huge rise in commodity prices, especially food prices, having terrible consequences, then we need to do much more about this problem than has been done until now," said IMF managing director Dominique Strauss-Kahn.
"World food prices have risen 45 percent in the last nine months and there are serious shortages of rice, wheat and maize," Jacques Dious, director general of Food and Agriculture Organisation (FAO), told a conference in New Delhi.
"Some serious steps are required to come out of the situation," he said, adding that the global food stock at 405 million tonnes was the lowest since 1980 with supplies of only 12 weeks in the case of wheat and rice.
Little wonder even Prime Minister Manmohan Singh said last week that a steep rise in the prices of food and essential commodities was making inflation management a rather difficult task and could hurt India's macro-economic stability.
"Sharply rising food prices can slow down poverty alleviation, impede growth and retard employment generation. A steep rise in food prices will make inflation control more difficult and hurt the cause of macro-economic stability," he said.
Finance Minister P. Chidambaram said: "It will take some time before the inflation further moderates. Do not expect miracles. What can we do if the price of crude oil or urea or other fertilisers goes up in the international market?"
But the opposition has been unrelenting in its attack on the government. And even the Left parties that prop the United Progressive Alliance (UPA) government have joined the chorus of protests.
"The Manmohan Singh government must justify its existence. It seems like there is no government in place," said Communist Party of India (CPI) MP Gurudas Dasgupta. "It is a shameful surrender to delinquent market forces."
But it is not that the government and the central bank have not taken steps to curb inflation - the export of some commodities like rice and edible oils have been banned while the cash reserve ratio has been hiked to check excess liquidity.
But economists feel while these measures are expected to yield results, they may not bring immediate results since this time around the situation globally is adding to India's problems.
"Inflationary trends will persist over the next few months, since manufacturing capacities have been fully utilised," said Mahesh Vyas, the managing director of a leading think tank in Mumbai - the Centre for Monitoring of Indian Economy (CMIE).
"Until new capacities are added, prices will remain on the higher side," he said and added that from food grain to edible oil and from cotton and textiles to steel and cement, there were inflationary expectations from all sides.
"The hike in cash reserve ratio will contain inflation to some extent. But the solution lies in expanding production and reducing import duty on products like the government did on palm oil," said U. Shankar, professor at the Madras School of Economics.
(With inputs from Jaideep Sarin in Chandigarh, Azera Rahman in New Delhi, Varda Bhatt and Abhijeet Deb in Mumbai, Papri Sri Raman in Chennai, Fakir Balaji in Bangalore and Mohammed Shafeeq in Hyderabad)
20-Apr-2008
More by :
Arvind Padmanabhan
Top | Analysis
