Fruits saw a 40-45 per cent rise in prices due to unseasonal rain around May this year. The ASSOCHAM Social Development Foundation survey said that more than half the lower middle class was forced to skip or squeeze their budgets for fresh fruits. Bananas which used to sell at Rs 30-40 a dozen in the past year were retailing at Rs 60-65 per dozen - a single banana sold for Rs 5 to Rs 7. Apples sold at double the price of last year with the prices of imported varieties going further up, the paper said.
The survey was conducted from April to May 2015 and over 1,000 housewives and 1,000 employees participated. While 87 per cent respondents said that rising food prices made life tougher, 66 per cent felt that vegetables were not even an option for a family of six, where the monthly salary was Rs 10,000-Rs 15,000. The low-income households cut the nutrient foods by 25-30 per cent. People in low to middle income groups bought less healthy food and more unhealthy food, the survey said.
So, it’s not just the onions which caused the tears this year. Other vegetables like tomato saw a rise of 61 per cent, chillies rose by 39.5 per cent, brinjal (long) by 36.8 per cent, cabbage by 19 per cent and lady’s finger by 11 per cent.
“The price rise can be attributed to the structural problems that persist in the economy. These structural problems were due to supply constraints that discouraged adequate supply of foodgrains and other essential commodities to households. On the other hand, being a consumption driven nation, the demand for essential commodities is high. Thus the demand and supply mismatch contributed to the price. In recent years, there has been a change in the dietary pattern of households. People are now shifting to protein-rich foods like egg, meat, fish, pulses which has led to a shift in demand of protein-rich foods. On the other hand, the supply of these commodities has not been able to match up to the rising demand. This has led to spiralling of food prices in recent times, thus leading to overall price rise in the economy,” Dr SP Sharma, an economist with the PHD Chamber, says.
He also tells you that this rise affects the economy and people significantly. “As the prices increase, people have less disposable incomes to spend, thereby leading to lower savings and lower flow of income which reflects in the overall growth of the economy. Also, price rise forces individuals to consume only necessary goods such as education of children, health requirements of self and family, and basic goods which affects their consumption pattern adversely, Sharma explains.
But he quickly points out that the price rise in India is not because of globalisation. It is because of domestic structural problems which affect the supply of essential commodities. Almost all the world economies are globalised and connected with each other, so one cannot relate globalisation with rising prices. It is majorly due to rising income levels and demand and supply gaps.
According to Sharma, the major factor contributing to price rise is the supply constraint which leads to hoarding of goods and hence the price rise. Also the agricultural production in India is largely dependent on monsoon which leads to increase in prices of foodgrains during deficient monsoons. “The demand and supply mismatch is a major contributor to price rise in India which needs to be dealt with at the earliest. The Government must encourage investments in infrastructure sector, especially agriculture infrastructure in terms of supply side infrastructure — from farm gate to consumer doorstep supply chain management, which could effectively tackle the challenge of inflation,” Sharma says.
Bhupinder Singh Mann, Bhartiya Kisan Union national president and a farmer, tells you that there is urgent need to eliminate the bicholia (middlemen). “These people add to the woes of farmers who are already facing a financial crunch. The farmer gets only 10-20 per cent of what the end consumer is paying for a fruit or a vegetable. Then there is mandi fees, commission agent fees and malpractices that have crept in,” Mann says, explaining how the entire operation works from a farmer’s perspective.
Once the vegetables arrive in the market, the farmer has to immediately pay mandi fees. Then the agents tell him that instead Rs 100, which is the going rate today, he will be paid Rs 80. The farmer has no choice but to sell at that rate plus pay six to seven per cent commission to these agents. After the unloading, the vegetables have to be stored, which also has a fee. All these expenses are borne by the farmer. The aim of these agents is to make as much profit as possible for themselves, ignoring the producer altogether.
“In the end the farmer may end up getting only Rs 1 per kg for, say, potato which sometimes is less that the cost of production. The problem is that nobody is looking at the farmer’s problems. The minute the prices of essential commodities goes up, the consumer is up in arms. He only talks about himself and not what the farmer is getting. Has anyone asked a farmer that if gobhi is being sold at Rs 60 per kg what rate are you gettingIJ,” Mann asks. This apathy, he tells you, arises because the consumer is vocal only about his problems.
“Whenever there is a shortage, it is the farmer who is blamed. But the question is simple — Why would a farmer not want to produce more if he gets more money from itIJ Why will he not want to invest in the land that is bringing in money for himIJ If the farmer is able to recover his production cost and makes a little money over that, he is bound to increase production, otherwise he will not be interested in farming and slowly the production will decline, leading to shortage, which in turn will push the prices up,” Mann explains.
Prof Bharat Ramaswami of the Planning Unit, Indian Statistical Institute, while telling you that the main reason for the present price rise is drought, one can’t shy away from the fact that a large part of the present situation is man-made.
“Shortage of land for farming, Government not investing enough in the food that we need, land needed for fodder for the cattle, feed for the poultry, etc all these need to be looked at. If timely action is not taken, it will become difficult to manage the situation. How prompt the Government is in taking action on these issues will be the factor to ease the price rise,” Ramaswami says, adding that food inflation and Pay Commission acts as a stimulus to the inflationary factors as they act as catalysts.
But it is not as if this is the first time that the country has seen an unprecedented price rise. “Back in 2008-09, a similar situation had arisen. It was a drought year. Also, we know that there will be a period of three months a year when the prices of onions will be high. But the consumer still wants to eat them. Why is it that he can’t tide over that time and not eat onionsIJ We really don’t need to put onions in everything. The result of the hue and cry over soaring prices is that the Government is forced to stop export of onions. This hampers the agriculture business. So it is the imbalance here that is leading to the shortage and therefore the price rise,” Ramaswami explains.
Umendra Dutt, executive director of Kheti Virasat Mission, says that the rising prices is because of Green Revolution which is a myth. “The revolution can’t be limited to just wheat and rice. What about pulses and oilseedsIJ What about vegetables and fruitsIJ What about lentils and other food itemsIJ A man can’t live on wheat and rice alone. For a nutritive diet, he needs to eat greens, pulses, fruits — a well-balanced diet. If one looks at Punjab, only five per cent of the villages are self-sufficient in terms of eating holistic food — they manage to grow not just wheat and rice but also vegetables. The rest of the States depends on the mandi for their needs. In our quest to grow more, we have changed the cropping pattern in India. Regions that never grew wheat and rice are now growing them. Areas meant for pulses are growing cash crops. It is not surprising that the rates are high. Next could be wheat and rice if necessary steps are not taken immediately to rectify the agricultural system,” Dutt opines. As for the rising price of pulses, he negates the premise that the rates have gone up because the percentage of the middle class in the country has increased, creating a shortage and resultant price rise.
“Everything is becoming market-centric instead of being social-centric. Nobody bothers to find out if the common man is eating a balanced diet and from where he is getting his vitamins and minerals. The solution is that if foods don’t give him that, replace it with artificial supplements. But these are medicines and they can’t give you everything that your body needs. Imagine the scenario today — zinc is missing from wheat. WhyIJ Because of excessive use of chemical fertilizers. It is the mono-culture that is ruining the basic fabric of India with respect to agriculture as far as procurement and warehousing is concerned making it a major problem,” Dutt says.
Then there is mismanagement when it comes to the supply chain of vegetables and pulses from the farmers to the consumers. There are some reports which say that there is a difference in wholesale and retail rates between 40 per cent and 60 per cent. In cities where there are wholesale markets, this margin increases. lack of infrastructure in villages, ill-equipped mandis and no direct marketing by farmers to consumers are other reasons for the rise.
“There is need to increase the holding capacity of farmers. If the farmer has proper storage facility for even five to six days, it will help him to get the right price for the produce. At least he will not have to pay to the agents, thereby increasing his margin. With more money in hand, he can increase production, bridging the gap that has crept in in agriculture today,” Mann opines.
Take, for example, the time when the cost of 500 gm butter in the early 80s was Rs 9. Today, the cost is Rs 189; in approximately 35 years there has been a 200 per cent increase. The same goes for cheese; the price today is Rs 232; a few years back, it was around Rs 160, again a percentage rise of 45. While these may not be considered essential commodities, it does bring to light the escalation in prices. The price of six eggs used to be Rs 18; today it is Rs 30 — 66.66 percent increase. The cost of one kg mutton stood at Rs 180 in early 2000; today it is Rs 480 — 166.66 per cent increase.
As for vegetables, in season no vegetable would be more than Rs 10 a kg. Today, even during season time, the price doesn’t come down to less than Rs 30 in retail. Apples that cost Rs 80-90 earlier, are now priced at Rs 150-180. A similar hike can be seen in grapes and bananas. “This is not surprising. Obviously, with less production and more mouths to feed, the cost of these is witnessing an upward trend. This is something that one should get used to,” Mann says.