Wednesday, November 23, 2011

Food Price at its summit!!


The surging food prices is a great matter of concern with most of us. I remember  US President Barack Obama once commented that prosperity in Indian and Chinese economy caused food price inflation in US market; as they are consuming more and more. Lots of hue and cry were raised to oppose that and justifiably he was criticized for such comment. Indian and China can boast of hosting world's greatest chunk of population but their per capita cereal or food consumption is no match with that of per capita US consumption. Leave apart per capita cereal consumption per year; if we see per capita cereal availability to Indians till 2008-09 was only 165kg and this remained more or less same since 2001. During the same period per capita cereal availability in China was 290kg per year and in US it was more that 1000kg! Source suggests it has further plummeted in India as of now. So, for the surge of food price increase in consumption level is no reason.

Our Prime Minister Dr. Manmohon Singh recently commented that overall prosperity amongst Indians resulted in food inflation. That means his his country men have started eating more! A point to be pondered; our respected Primed Minister, a renowned economist only relates the old economic theory of 'demand and supply' fluctuation for this sustained surge of food prices! It's a vague argument. The prosperity is enjoyed; if at all, only by 10-15% of our population, rest remains where they were or still further behind. Just imagine few men with more cash in hand are rushing to 'sabzi' bazaar and filling their bags with green vegetables! So, the price of bringal, potato, onion or spinach have sky rocketed! Not the green vegetables anything comes in the parlance of food or edible has become dear and becoming dearer with every passing day.

Experts and economics are finding out everyday new root of the causes without offering any measure to set the things right. With normal agriculture productions, sufficient buffer stocks in the hands of government; what turns out to be wrong for such surge! Some suggests that hoarding and involvement of middlemen from farm gates to retail markets via whole sale markets; is stretching the price. This is evident from the difference of price at farm gates and in retail markets. They suggest overseas retailers like Wall Marts should be permitted in India to operates as they buy from farmers straight and sell their produces through their own retail shops. But if that's true, Reliance and Metro Cash and Carry; both big players in food and grocery markets in some states fail to check the price at any level.

In fact there may be multiple reasons for sustained price rise for past one year or more. The falling rupee price turned the imports of crude and any other agricultural or industrial inputs dearer. Fiscal deficits, cut in subsidies and Reserve Bank's futile gaping in dark seeking solution to check overall inflation by increasing interest rate in rapid succession have failed to deliver desired result. However, our political bosses and their machinery are over looking the role of speculative commodity market in its future trading. Most of the food items , pulses, edible oils, cereals are traded in this market and legally one can take huge position as there is no restriction. Here one can make huge profits, literally forcing the consumers starving for food items! Say if you keep on making position on any grain or pulses, considering that in future the price will further rise. There ought to be a shortage of supply in the market of the those grains or pulses. Simply with the increasing gap between' demand & supply' the price will rise, at least till the next season. Since the surge of food price is a global phenomena now and so the crude, importing of these items do not help either. Government to impose restriction for such speculative position in the future markets. Hoarding should be discouraged by framing law with severe penal actions to discourage the traders.

I am not an economist; just an onlookers, taking the things of current situations I only can tell you what I find on the surface. But there are things deep within. He who knows should come out.

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