Spectra of rising food prices
-Kavya and Nandini
Summer monsoon rains are vital for 55 percent of India's farmlands that lack irrigation facilities. In 2009, patchy rains led to the worst drought in nearly four decades and drove annual food inflation up to more than 21 percent. India has stockpiles of staples like rice, wheat and sugar that can be released, but the government has limited means to control surges in
the cost of fruit and vegetables, which have the largest impact on food inflation.
India’s ‘ Essential Commodities Act ‘ gives the government powers to control supply and distribution of various commodities for securing equitable distribution and availability at fair prices. The new government on Tuesday imposed export restrictions on certain farm commodities and ordered a crackdown on hoarding to control rising food prices, a day after wholesale price inflation hit a five-month high. A jump in prices of potatoes and onions last month drove inflation to 6.01 percent from 5.20 percent in April, contributing to a sell-off in financial markets. Prime Minister Narendra Modi, who was elected last month , amid, widespread anger over rising prices, has made tackling inflation his top priority. Forecasts of weak monsoon rains that irrigate much of India's food production have added to inflation fears, and volatile vegetable prices have risen by double digits. Government is keeping a close watch on the price movements of 22 commodities and would offload additional rice stocks in the market to prevent a build-up in inflationary expectations. Also government is planning to release 5 million tonnes of rice from state stockpiles to curb inflation.
The weather department predicts below-average rainfall between June-September this year, which could hit summer crops such as rice, corn, soybean and cotton. In addition to fears of food inflation, lower grain production could reduce the volume of rice exports from India, the world's top supplier. A decline in rice exports from India could underpin global prices, although gains will be capped by plentiful world supplies.
June has been this dry only thrice in the past 100 years. This has delayed the planting of crops, caused heat waves in parts of the country, and raised fears of inflation, but the Met department (IMD) is already expecting better rain in the next two months.
This is significant because most of the monsoon rain is spread across July and August, and timely efforts by the government can minimise losses. Vegetable prices have stabilised although the current dry patch can change the situation.
The Prime Minister has already hinted that his Government may take some tough measures to revive the economy. He has also placed the issue of keeping inflation under control on the top of his agenda but the prediction of poor monsoon this season poses a tough challenge to the new Government.
The scarcity and inflation of food is the biggest task for the new government. After making promises to improve the economy of the country this is a very difficult task for the government to prove themselves. Even though the Prime Minister Narendra Modi amid widespread anger over rising prices, has made tackling inflation his top priority, let see what actions does the newly formed government will take to solve this problem for the public.