It is protein products, not wheat and rice that are pushing food price index
In the past, it was rising onion prices that made politicians shed tears out of fear of losing elections. Now it is shooting milk prices that has become a major cause for concern.
Prices of protein products like milk, eggs, meat, along with fruits and vegetables, have increased manifold and has affected people of all economic classes. The latest figures released on October 13 by the ministry of commerce and industry says India’s wholesale food prices increased 9.32 per cent in the week ending October 1, which was a little lower than the 9.41 per cent inflation recorded the week before.
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Week Ending 1st October, 2011 (Base: 2004-05) | |||||||||
Commodities/Major Groups/Groups/Sub-Groups | WPI Oct 01, 2011 | Latest week over week | Build up from end March | Year on year | 52 week avg | ||||
2010- 2011 |
2011- 2012 |
2010- 2011 |
2011- 2012 |
2010- 2011 |
2011- 2012 |
||||
Food Articles | 199.5 | 1.00 | 0.91 | 11.01 | 11.39 | 17.14 | 9.32 | 10.74 | |
Cereals | 177.4 | -0.12 | 0.68 | 1.51 | 3.44 | 5.06 | 5.41 | 4.04 | |
Rice | 177.1 | 0.24 | 1.90 | 2.58 | 6.18 | 4.69 | 5.86 | 3.68 | |
Wheat | 167.6 | -0.41 | 0.36 | -1.81 | -1.76 | 4.15 | -0.24 | -0.80 | |
Pulses | 211.5 | 1.49 | 0.86 | -1.15 | 11.67 | 4.05 | 6.87 | -6.62 | |
Vegetables | 235.4 | 7.98 | 6.23 | 60.60 | 64.16 | 25.26 | 13.01 | 13.33 | |
Potato | 156.0 | 3.94 | -1.33 | 47.50 | 45.39 | -48.30 | 3.79 | -16.49 | |
Onion | 235.4 | 12.25 | -8.80 | 67.09 | 39.54 | 28.18 | -10.15 | 38.96 | |
Fruits | 177.6 | 0.83 | 1.25 | 8.95 | -4.67 | 14.71 | 12.19 | 21.78 | |
Milk | 196.1 | 0.00 | 0.00 | 4.22 | 12.70 | 21.38 | 10.35 | 11.14 | |
Egg, Meat & Fish | 211.7 | -1.48 | -1.85 | 10.06 | 7.24 | 28.06 | 9.92 | 13.14 |
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Source: Ministry of Commerce and Industry press release dated October 13
Changing inflation dynamics
Agriculture economists from Punjab Agricultural University and Indian Agricultural Research Institute say there are various reasons for the steadily rising prices the past two years. Hoarding, faulty import-export policy and increasing purchasing power are some of the reasons, they say. Indian economy is growing at more than eight per cent and purchasing power of people is also rising which is one of the reasons why people are able to survive the price crisis.
H S Sidhu, head of the economics department, Punjab Agricultural University, says, “Change in food habits are attributed to increase in incomes and changing lifestyle that have diverted food habits from cereals to more protein diet.” He, however, adds that with the arrival of kharif crop in the market now, there would be certain decrease in food inflation.
Deepak Mohanty, Reserve Bank of India’s executive director terms the rise as “structural food inflation”. His research shows that growth rates in monthly per capita expenditure have risen from 0.2 per cent in 2000-05 to 1.2 per cent in 2005-10 in rural areas and from 1.3 per cent in 2000-05 t0 2.0 per cent in 2005-10 in urban areas. As a result, the share of proteins in food consumption has risen from 27 per cent in 2004-05 to 30 percent in 2009-10 in rural and from 28 per cent to 32 per cent in the same period in urban areas. He presented his findings in a speech titled 'Changing Inflation Dynamics in India' on August 13, 2011.
A policy maker with the Planning Commission says failure to push through much-awaited reforms such as opening the multi-brand retail sector to foreign investment is one of the possible reasons for persistent high food inflation. “Once FDI is allowed, it will surely ease the situation,” he adds.
An official with the agriculture ministry says commodity prices are expected to decrease as first advance estimates of production of major agricultural crops is out. “We are expecting around 124 million tonnes of foodgrains and 209 lakh tonnes of oilseeds during the kharif season,” he says. “With a good monsoon and bumper production, we feel that there would be a decline in commodity prices and it would ease inflation by the year-end.” He, however, refused to comment on what were the reasons of inflation fluctuation.
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