Inflation concerns

Despite the robust rebound last year in the output of foodgrains (rice, wheat, coarse cereals and pulses), oilseeds, sugarcane and cotton, there has been no real respite from high prices. Food inflation remains stubbornly elevated, albeit with minor variations week on week that mean little to the vast majority of people. At a combined 45 million tonnes, rice and wheat stocks with the government are high too, but their current cost is far higher than the current market price. So, there may be no takers unless their sale is subsidised. Despite a rap on the knuckles by courts, rather than resolve the dilemma conscientiously, New Delhi seems determined to resist subsidies on open market grain sales. Meanwhile, the foodgrains rot.

New wheat procurement will pose a fresh challenge as additional warehousing space is limited and storage under cover and plinth is sure to expose grains to the elements. Harvest of wheat and other rabi crops (oilseeds, pulses) is already underway, but its salutary impact on open market prices is just not visible. Tightening of bank credit from time to time has had no perceptible impact on food prices. The inflationary environment is building up globally too, with geopolitical instability in the West Asian and North African region keeping crude at $110-115 a barrel. Given the rub-off effect of high energy prices across the board, there is general buoyancy in the prices of all essential commodities. With the onset of summer, fruits and vegetables are likely to get scarce and pricier. A national plan of action to augment kharif 2011 output of major crops is critical, considering the further upside risks to food prices.

Supply-side problems including infrastructure inadequacies and marketing restrictions are often cited as issues that demand urgent intervention. These problems have been with us for some time and deserve to be addressed with due seriousness and a long-term perspective. State Governments have to be brought on board in resolving supply-side problems including reforms in antiquated agri-produce marketing regulations and investment in rural infrastructure. Engaging the private sector through appropriate policy measures to ensure food security is necessary. There has been no follow-up action on the unduly wide difference between wholesale and retail prices of essential food products that the Finance Minister referred to in his last Budget speech. Put all these together and one feels the government's actual record in redressing the common man's inflation grievances leaves much to be desired. It looks like the aam aadmi will have to learn to live with a big hole in his pocket, at least in the foreseeable future.

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