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India grows so does the Inflation – Don’t talk about Indians!!!

Posted by newscap on February 5, 2008

Inflation makes essential food items costly
Sunday, February 3 2008 18:19(IST)    

New Delhi, Feb 3: Inflation has taken several essentials like coffee, pulses, wheat, condiments and spices, fruits and vegetables, eggs, fish, meat and milk out of the common man’s reach, an Industry body said.

The prices of these commodities have gone up by 82, 34, 24, 22, 21, 19, 18 per cent respectively from January 2003 to January 2008, a study by Associated Chambers of Commerce and Industry of India (Assocham) revealed. However, during the same period, the rise in per capita income of an average individual went up by about Rs 5,000.

The inflation measured in January 2003 was 3.41 per cent, while it was 5.46 per cent and 6.42 per cent in January 2004 and January 2005 respectively.

”In January 2006, the inflation was measured at 4.43 per cent against 5.42 per cent during the same month a year later, while that during January 2008 was less than four per cent, but the regulated inflation rate could not show much of its influence on price rise of essential commodities as contained inflation contributions were seen in other products on whose weighted price the general inflation is worked out,” Assocham President Venugopal N Dhoot said.

Among the essential commodities, coffee witnessed the steepest rise of 82 per cent, the staple intake for most of southern India, followed by pulses (34 per cent), wheat (22 per cent), condiments and spices (21 per cent).

Fruit and vegetables, eggs, meat fish, milk prices also shot up by 19 per cent and 18 per cent respectively in the last five years. The prices of other food articles and eatables, rose by 38 per cent.

The principal reason for hike in coffee prices includes its buoyant demand in domestic as well as overseas market. Its production could not keep pace with the increasing demand and amounted to constrictions of supplies and increased focus on exports.

All essential pulses have witnessed extremely higher volatility in their prices, which went up to the extent of over 34 per cent between January 2003 and January 2008, the study said.

The gap between demand and supply in the country has led to a hike due to dormant production of pulses. The domestic consumption stood at about 20.25 million tonnes against a production of less than 13.5 million tones, Mr Dhoot pointed out. Wheat prices have remained firm on the back of low stocks and high international prices. On a year-on-year basis, wheat prices have increased by 22 per cent from Jan 2003 to Jan 2008.

The recent increase in the price of wheat is because of demand exceeding supply a situation arising out of lower market arrivals, lower procurement, decline in the buffer stock below the norm.

Wheat, the staple imgreaient used to make bread, pasta, chapatti and much else, epitomises the trend.

The prices of milk increased by over 7 per cent in the recent past despite the country being the largest producer of milk in the world, with its production levels going up to 99.8 million tones by March 2007 from 94.5 million tones in 2006. Increase in input, utility and services costs are the reasons that led to the rise in prices of milk.

Mr Dhoot further said the increase in cost of milk production and raw materials had compelled to raise the procurement price. The main factor for rise in prices, is the low powder stocks with dairies, which are used for recombining into liquid milk in the lean season.

Another reason for rise in prices is rapid increase in the consumption of milk and its by-products among the households.

The eating habits have undergone a major transformation according to the study with the growing demand for pizzas, in which large quantities of cheese and butter is used. Prices of Eggs, Fish and Meat also edged higher from Jan 2003 to Jan 2008.

However, the ASSOCHAM in its assessment predicted that the inflation will come down and remain stable between 3.5 per cent to four per cent in next few months in view of good harvest in current cropping season, owing to favourable conditions.

The supply demand mismatch gap will be gradually filled up in the coming months on account of good climatical conditions that will accelerate agriculture production, Mr Dhoot pointed out.

However, he said with the impending government intervention, their will be little scope for manipulators to shoot up the prices of essential commodities as these will be contained with markets becoming more stable.

The body has recommended a two pronged strategy for the government which include that it should manage expectations by buying futures options in the international markets, and second, by implementing a strategy for improving production and productivity of wheat.

The government should evolve a flexible procurement and pricing policy for import programme spread over several years. This would smoothen the domestic supply-demand gap, the study added.

”Our imports programme should be structured in such a way that we take advantage of the global price trends and stocks are augmented when the international prices are low,” the ASSOCHAM president said.

The price of Tea have also increased by almost ten times while fruit and vegetable prices continue to spiral upwards.

The abnormally high percentage of fruits and vegetables that goes to waste because of the lack of cold-storage facilities was the reason for the hike, the survey said.

Thanks: One India


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