Food inflation requires firmer handling by the government     

Food inflation has assumed alarming proportions in the last two months. It was at a 71-month high in October and despite a series of steps by the government, the situation does not seem to have improved much. Onions, a necessary ingredient in not just non-vegetarian cooking but also while cooking many of the vegetables, continue to be sold at astronomical rates. Several state governments have been forced to procure onions and distribute them at reduced rates.

The long queues for onions, often controlled by policemen, provided a surreal sight and a reminder of bleak times of rationed food supply that most Indians believed they had left behind. The government reacted by first banning all export of onions and thereafter by hurriedly importing onions from Egypt and Turkey. As a knee-jerk reaction, the Mineral and Metals Trading Corporation was also tasked with the import of onions.

It is true that a multiplicity of factors over which the government did not have any control, drought and unseasonal rain among them, did affect agricultural produce. Price fluctuations deterred farmers from growing several crops. Fodder and feed shortages also influenced farmers’ decisions. So much so that despite a good monsoon, the area under cultivation of onions, sugarcane, maize and bajra, etc. went down. The NDA government had inherited a near double-digit food inflation in 2014, which it had managed to bring down to a low, single-digit by 2016. But despite a flat wage rate and international fuel prices nose-diving, prices of fuel in India remained steep. While natural causes did play a role, it would appear that government policies like the senseless Demonetisation, squeezing the traders, tighter credit and politics

over the Minimum Support Prices have also contributed considerably to the present crisis.

Food inflation is worrying because it indicates not just short supply but also rising demand even at high prices. The implication is that while people who can afford to pay high prices will buy more than they may actually need, the poorer people, unable to pay high prices, will be left in the lurch without access to essential food. The mismatch between demand and supply can wreak havoc on the economy as well as on the lives of people.

The growing inequality in the country, with the rich becoming richer and the poor poorer, is adding to the crisis and, unless urgent steps are taken, things may well spin out of control. Onions, vegetables, fruits, oilseeds, sugar and milk seem to be especially vulnerable at this time. But the pain of the people will be much greater if prices of grains also start spiralling northward.

In the last Union Budget in February before the 2019 General Election, the government had announced the PM Kisan scheme, offering farmers a cash transfer of ₹6,000 every year. But none of the laboured schemes has succeeded in providing relief to farmers, stabilising prices and supply chains. The government has one more opportunity to usher in agricultural reforms when the Union Finance Minister presents the next Budget five weeks later. Tinkering with food import and exports can at best be temporary palliatives. What the country needs is a more consistent and more meaningful structural overhauling of the farm sector.