Tuesday, February 15, 2011

Needs, comforts and luxuries at same price

All sold at Rs 65: Onion (1 kg) petrol (1litre) and Beer (1 bottle)

All citizens – irrespective of their earnings – are a worried lot. Food inflation was above 15 per cent at the end of January. While the vegetable prices soared by 67.07 per cent on annual basis, onion became expensive by 111.58 per cent. Prices of eggs, meat and fish went up by 13.58 per cent year-on-year while cereal prices, too, went up marginally by 0.53 per cent. Fuel and power also became dearer by 10.87 per cent year-on-year.

Besides vegetables, fruits, milk and other protein-based items have gone out of reach of the lower middle class and the middle class is finding it difficult to adjust themselves in this high price regime.

Watching the current trend of price rise, RBI has raised the March-end forecast of headline inflation to 7 per cent from 5.5 per cent earlier. Reserve Bank of India's Deputy Governor, Subir Gokarn has said that oil, food price rise is likely to impact inflation outlook in 2011.

The farmer continues to be burdened by debts, both from banks and other institutions. Imperfections in agricultural marketing and lack of post-harvest food management infrastructure, such as efficient transport, cold chains, agro-processing units etc have largely contributed to the problem. This deficiency is apparent also from the huge difference between farm-gate prices and consumer prices. Besides, poor post-harvest handling of farm produce leads to substantial, albeit avoidable, losses, estimated at over 30 per cent in the case of perishables like fruits and vegetables. At the time of sowing, farmers are seldom sure of what will be the fate of the season’s output. Such flawed and knee-jerk policy reactions seem to stem partly from a lack of a reliable mechanism for foreseeing production and hence likely prices of crops. The government, both at the Centre and the states, has failed to act.

Will the people continue to bear the high prices or will the government and policy makers act? Will there be a long term thinking or merely knee jerk reaction? Will there be another Green Revolution or the per acre yield continue to be what it is? These are the tough questions which the people are asking now. It was time the government came out with appropriate response and solution.

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