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Food prices could lead to next crisis
Mon, 11 Aug Pre-Open

Few are not happy with the fact that the credible inflation strategy is not yet in place. The food inflation continues to raise its ugly head. While onions brought tears to our eyes last year, it is tomatoes this year. The annual retail inflation stands around 9.5% since January 2012. The prices of vegetables have gone up by 64%.

The increasing food prices, especially the soaring tomato prices have burned a hole in consumer's pocket. This infact has now raised the doubts about the new government's capabilities to control the rising food prices. The reasons are not hard to figure out. In our view, one is the structural factors have fueled the inflation. Especially, in case of India, lack of enough irrigation facilities, too much food wastage, lack of enough warehousing and storage and improper supply chain systems and so on have affected the food prices. The other prime reason is corruption, political motives and policy loopholes. The same have also led to hoarding at producer levels. Government's failure to address the same have too fueled the price rise.

The archaic distribution system needs a total revamp. It restricts the farmers to sell at a fair price in regulated markets and the middlemen pocket a larger share. Food shortage is an issue confronting the nation, despite India being the world's second-biggest producer of fruit and vegetables after China. It is quintessential to curb food prices if India were to achieve a steady economic growth, claims a leading financial daily. And we couldn't agree more. The solution to the food scarcity can well be sorted out by having more cold storage facilities and better mobility of food stocks.

While, RBI is trying its best to take steps to protect common man from rising inflation, not enough action has been seen from fiscal side of the government so far. Despite the economic reforms taking place, the prices are just going up.

While we have little control on some of the key commodity prices such as oil and natural gas that are globally determined and a prime reason behind fiscal deficit and inflation, rationalizing food price is something that is under our control and can make a huge difference to country's fiscal health and inflation. Hence, the Government must address this issue with urgent attention and bring back the economy on a stable reform path.

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2 Responses to "Food prices could lead to next crisis"

Pradeep Kumar Nair

Aug 11, 2014

The government is letting the folks who funded their election campaign to collect back the money. With the threat of a common agricultural market, the folks who funded are now collecting the proverbial pound of flesh. BTW, I am guessing you are using tomatoes as an example, because the prices of some of the other vegetables is crazy!

So the food prices coming down anytime soon is a mirage!


Aug 11, 2014

Food prices particularly onions and potatoes have been soaring lately.Now it is tomatoes. Hoarding has made have made food grains and onions costly.A very inefficient PDS system also contributes to the problem.This leads to a high inflation and the real rate of return (profits from your investments over that of inflation) is very small.
Inflation needs to be controlled as a high inflation meets no returns to the investor.

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