On Top of Slowdown, Prices Are Now Zooming Up

The Narendra Modi-led Bharatiya Janata Party government has been proclaiming ad nauseum that it has kept prices of essential items under control throughout its rule since 2014. That the prices of some commodities, especially food items, did not rise constantly is a fact, although for many other commodities, like fuel, prices did rise. But all that has changed in recent months. 

Although wholesale prices continue to remain stagnant, the prices that consumers actually pay in their local shops have been zooming up inexorably. This is clearly visible in the price data collected by the Ministry of Statistics and Programme Implementation (MOSPI) from 1,114 markets in 310 selected towns and 1,181 selected villages. 

Prices of 12 essential food groups (like cereals, pulses, cooking oils, meat and fish, etc.) were increasing at a shocking rate of nearly 8% in October 2019 compared with a year ago. In fact, a year ago inflation was in negative territory. [See chart below]

Food items make up the bulk of a family’s expenditure, and for poorer families (that means most of Indians) it is nearly half of the total family budget. So, rising food prices hit the family’s economics very badly, especially for poorer families.

The data ‘warehouse’ of the MOSPI (linked above) also gives food group wise prices. The rise in some important food groups, that form the staple for most Indian families, are given below in the composite chart. Note that practically all food groups are showing a marked rise in prices over the past year.

Both vegetables and pulses are currently experiencing very high inflation rates. Vegetable prices are rising at a staggering rate of 26% compared with the previous year. Such is the emergency that even an otherwise indifferent government has announced that some 1.2 lakh tonnes of onions will be imported to cool the prices. That’s a sign of the government’s bankrupt approach because the consumption of onions in the country is nearly 24 million tonnes annually or, say, 2 million tonnes per month. Bringing in a paltry 1.2 lakh tonnes will not help. But then, all this is just for show. Actually, the government has no clue on how to deal with this. Or, it doesn’t have the will.

In the above charts, note that prices of nutritious and essential protein sources, such as meat and fish, eggs and milk are all seeing escalating hikes. So are pulses, another protein source for vegetarians. Any cut back in consumption of these items because of high prices will have disastrous consequences for the health of families, especially children. As it is, India has very high number of malnourished children. Any further deprivation due to inflation would be very damaging – and is completely avoidable.

In the context of the slowdown, this price rise is all the more lethal. Joblessness is raging at over 8%, according to Centre of Monitoring Indian Economy’s monthly data. For families that have an unemployed person, paying more for food is unbearable. It will mean greater impoverishment, debt and ruin. Even those who are employed are facing cuts in their earnings because there is insufficient demand in the market. For them, more spending on food means more distress.

Yet, the Modi government is blissfully unaware of this widespread distress and continues to pander to the corporate world by announcing more concessions, more tax breaks and more funds to help them out. 

Raging inflation is just another way of transferring resources from the poor to the rich. The government’s culpability in this and its silence on rising prices will not only cause more distress for the people but will also alienate them from the ruling party. Will the fixers in BJP think about this before it is too late? Also, do they even have the capability?