August 16, 2009

Negative inflation... My foot!

Probably only the prices of Oil have been on a plateau this year. Rice has been consistently a high rise tower while pulses have been the Burj Al Dubai on a price histogram. On one hand the Government makes tall claims, backed up by some crazy statistics and more eloquent press releases, that the inflation which had touched 12% has now gone two points into the negative. Total bullshit.

I'm not really sure what parameters are taken into consideration when they calculate the inflation figures, but I'm pretty sure that rice and pulses do not have a place on that list. A Nokia E71 which costed 20K a month ago is today sold at 18K and a Sandisk 4GB SD card which was priced 700 bucks in April is now costing only 500bucks. And well, I'll not even talk of the falling prices of LCD TVs. And if you are not satisfied, wait for another month. Dussera and Diwali discounts will then take inflation into negative double figures.

Yes, tomatoes which had costed 30 bucks in the summer (when of course the production goes down) are now 20 bucks and cauliflower is now being sold at 20 apiece instead of 25. Vegetables are taken for consideration when it comes to inflation, but more important pulses and rice seem to be on a low index. Two months back, Tur dal was sold at 50-60 bucks a kilo. Two years back it was priced 30-40 bucks. Today, it costs 110 bucks. A 300% rise in the cost within two years for a major food produce is not good for the economy. It shows that either the production has fallen or there have been induced periods of black market hoarding.

What has the Government been upto doing the entire process needs to be investigated. The rut started early in June and as half of August has gone abegging, apart from declaring food security as a priority from the ramparts of the Lal Qilla, nothing concrete has been done. Comfortably enough, the authorities are blaming the traunt playing monsoon for the mess that the food prices are in. Very understandable if they are talking of perishables like fruits and veggies. But what about rice and pulses? If there is scanty rainfall, then the impact should be in the next half of the year and not right now! The previous crop should be the one which brings the food onto the supermarket racks. It is absolutely clear that the price rise has been artificially induced by food stock hoarding by distributors to create a more paying market and thus encourage black-marketing. The Prime Minister has declared in his Independence Day speech that we have enough and more stockpiles of food supplies to last us even if the worst fears of the Department of Metro-illogical astrology come true. If that is indeed true, why is that stockpile being kept under a lock and key? Why is it not being made to come out into the markets?

One reason why the market physiology has changed are our altered buying habits. Traditionally, rice and pulses used to be marketed in bulk, where in most consumers (and the retailers) kept adequate stocks of these at home or at retail godowns. Today, the supermarket culture has taken over. I still remember my childhood when we used to go to the wholesale shops and buy those jute bags filled with 50 or 100kgs of rice and dal. Today, we buy a 20kg packet of rice (and sometimes even a 5kg pack) and dal is more often than not bought in 1-2kg packs. This makes the retailer also procure the same in lower quantity packages. The distributor thus holds the greater stockpile. And he sits on his stock shutting all supplies for a short period to declare an artificial shortage and in the process jack up the prices and make more moolah. On the other side of this distributor is the farmer, who too bears the brunt of this hoarding as the distributors buy the produce from the farmers at a lower rate citing lack of sales and increased stock reserves. So basically the end user and the producer are being taken for a ride while the distributor goes laughing to the bank. One reason why the authorities are unable to tackle the issue is the rampant corruption and kickbacks associated with the distributors and the politicians being hand in glove.

This has major adverse effects on our food production too. A farmer who has been traditionally producing rice now finds the costs prohibitive considering that he has not been getting good value for his produce. He tries to overcome this by giving way to newer crops like either the genetically modified varieties of rice or shun food crops and get into tobacco or cotton production. Or corn, which has a better export value, but has low usage in our own country. Or he burns his fingers trying his hand at growing vegetables. In the meantime, the soil too starts losing a bit of its sheen. The farmer might soon get visions of selling his land for a lumpsum amount to the industrialist who finds the place ideal to setup his car or mobile manufacturing unit, or maybe even to the government for a SEZ that gets planned.

I would not mind paying a bit more for my mobile calls or on my cable television bill, but when it comes to paying more than its worth for rice and dal, it cracks me up. If a person who can afford these high prices says so, imagine the plight of the poor person who has to struggle to make ends meets. At the end of the day, you and I can live without reading this blog or without seeing a Shah Rukh Khan movie on the 100 inch LCD home theatre system; but I need my dal and rice day in and day out. And I need that without having to pay a premium.


Shruti said...

Damn!!! This is so awful :( I thought there is a genuine shortage problem making prices soar. But does buying in bulk or not really matter? Coz once u buy 100 kgs, for a long time u aren't buying any more. If u come home with 10kg, then u are going to buy stuff sooner na?

Vrij said...

If I buy 100kgs, I keep them at home. The hoarder has 90kgs less to hold per household. Imagine the effect over a couple of months.

Shruti said...

but everyone doesn't shop at the same time, right?

Kachra said...

i guess it makes better sense when u talk about this ... i tried to shout at top of my voice and it went unheard .. my take is still that Congress and its party candidates are openly black marketing the stuff ... even upon investigation ... nothing comes out and they wud add cost of investigation to the cereals ..