Centre must coordinate with States to contain inflation in essential commodities
The Prime Minister's Office's directive to Niti Aayog to make a strategy to find a permanent solution to contain food price inflation is welcome. Of late, price rise of two essential vegetables — tomatoes and onions — both of which are widely used across households but are grown selectively — have spelled nightmare for traders and consumers alike. Equally, it has been a cause of worry for policy-makers. While tomatoes are being sold at Rs 100 per kilo (which is about four times higher than normal price), onions, which were being sold at Rs 12 per kilo until late last month, are now being sold at Rs 50 per kilo. Overall, price rise of essential items like food grains and vegetables are not so uncommon — they come as fallout of poor monsoon. Variable weather patterns is one of the reasons that leads to food grain shortages and, hence, fuels inflation. But what is most shocking is that unscrupulous traders lose on time to start hoarding by offloading commodities at exorbitant rates even before the Government can take action. Certainly, we have had a normal monsoon this year but it hasn't been well-distributed. Even as several regions in western and north-eastern part of the country are witnessing the fury of the floods, several regions in States like Karnataka, Maharashtra and Tamil Nadu have been facing like situation. The case of onion prices is all the more glaring because it keeps oscillating every year. One of the primary reason for frequent pricing of onions is because its demand is inelastic — which means no matter the price rise, its consumption witnesses only a miniscule reduction. Simultaneously, despite deficit rainfall, its production has risen over a period of time. A bumper onion production had left farmers in tears last year.
It can, hence, be concluded that the problem is not just to do with a deficit monsoon or shortage of food supplies or hoarding. What is most dangerous is the lack of a policy framework, which leads to the creation of an artificial environment in the market. The irony is that in the midst of shortage and rising prices there is actually a glut in the market. This leads to confusion for both the farmers and consumers. And it is here that the Government must focus upon. It must strive to create a healthy, stable economic environment for farmers. The Modi Government made a good beginning to contain inflation and prices of essential commodities. It had taken several initiatives in this direction that supplemented other efforts. One of the biggest step has been that the Government ordered a major crackdown on hoarders to keep check on cartelisation and hoarding of pulses. Such initiatives, however, must be sustained and also complimented with other efforts such as the creation of adequate infrastructural facilities. There have been several reports that point how food grains rotted in the godowns. It must indeed look for a permanant solution to stabilise prices of food grains and vegetables across all States.