Inflation has moved to ‘cloud eight’ amid the shrinking income of people. It has registered an eight-year high jump and settled at 8.38 per cent in April. It may further eat into the pockets of the masses, who are struggling hard to cope with multiple disruptions caused by the COVID-19 pandemic in their household economies. Retail inflation (RI) surging to almost double in a year conveys a lot, as it shot up from 4.23 per cent in April 2021.
This January onwards, RI has been above the Reserve Bank of India (RBI)-mandated ceiling of 6 per cent for the fourth consecutive month. As the inflationary pressure refuses to die down, the Reserve Bank of India (RBI) recently increased the repo rate – the rate at which the central bank of India lends money to banks – by 40 basis points (bps) to 4.40 per cent. The move is aimed at reducing inflation.
The inflation figures revealed that the food growers and other rural households are facing more inflation than people in small towns, cities and metros. While urban retail inflation rate was 7.09 per cent, the rate for rural areas went up to 8.38 per cent. Food inflation was 8.50 per cent in rural areas and 8.09 per cent in urban areas. In April 2021, food inflation in rural areas was just 1.31 per cent while that in urban ones was 3.15 per cent.
The figures released by the Union Ministry of Statistics and Programme Implementation (MoSPI) indicate that food items have a big role to play in the increase in retail inflation. The prices of almost every essential in the food basket have increased. Edible oil prices went up in April by around 18 per cent. The edible oil market has set people’s kitchen economy on fire. There is no relief from the skyrocketing prices of vegetables, which have gone up by 16 per cent, and 11 per cent for spices. The prices of prepared meals, snacks, sweets and more have gone up by 7 to 10 per cent. Cereals and their products have become dearer by 6 per cent, while milk and dairy products have witnessed an increase of around 6-8 per cent.
Initial deliberation shows that there are no signs of relief from inflation in near future due to worldwide food crises, which are likely to deepen further because of the Ukraine-Russia war and other disturbing global developments. The Intergovernmental Panel on Climate Change (IPCC) set up by the World Meteorological Organisation and the United Nations Environment Programme has predicted that India’s high vulnerability and exposure to climate change is going to threaten food security and is one of the major root causes of inflation.
This time the extreme heatwave reduced the yield of wheat and other rabi crops up to 25 per cent, fuelled a food crisis coupled with inflation, and has affected farm income also. Spike in food and fuel prices is throttling the existence of the rural population. In Punjab and Haryana, most wheat and rice growers rural households depend on urban supply to add edible oils, pulses, fruits, vegetables and other essentials to their food basket.
In India, nearly 70 per cent of the population resides in rural areas, majority of them are covered under the Food Security Act and get two to three staple foods like wheat and rice under the Targeted Public Distribution System (TPDS), but they hardly get pulses, edible oil and other essentials.
Growing gaps between the supply and demand of food items are bound to worsen if global peace stays precarious and the COVID-19 pandemic continues to lurk around. Given our dependence on imports for edible oil and other materials such as petroleum products having a direct bearing on inflationary sentiments, India needs to tread extremely cautiously while being quick in taking corrective short- and long-term measures.
PDS Must be Synchronised with Inflation
The Public Distribution System (PDS ) has its limitations and inherent drawbacks. It does not fulfil all need-based requirements of the poor. That is why food security does not secure the poor rural people from a spike in inflation. They are the worst victims of price rise. Edible oils and pulses become out of reach for them as they cannot afford to buy them. Fruits and nutritious items remain out of reach for more than 70 per cent of the rural population even after 75 years of Independence.
Prices of cooking gas cylinders have crossed Rs 1000 per unit. Although during elections, policymakers offer freebies like three-four cooking gas cylinders in a year, freebies are not a sustainable solution to counter rising inflation. A wholesome approach has to be adopted. There is no mechanism to monitor either the supply chain of essential items or their pricing from factory to fork or farm to fork. Unfortunately, farmers are not benefitted when retail prices of food items go up.
Given our inability to ensure that every citizen has access to nutritious food, we need to bring seriousness in our efforts to deal with inflation. Circumstantial decisions such as banning the export of wheat won’t be of much help as most of the food items are costlier today and hitting India, a country dominated by poor- and low-income groups of people and a small percentage of us lording over national resources, opportunities and facilities. To start with, PDS must be synchronised with inflation and the commodities with high prices must be included in PDS to provide relief from inflation to majority of the population.
The poor in India covered under the Food Security Act should also get edible oil, pulses and other essentials for their food baskets from PDS outlets at affordable prices. Kendriya Bhandar outlets should be set up at block level to cater to at least a cluster of 25-35 villages and other smaller towns in a public-private partnership. It will not only deflate inflationary pressure but will also create job opportunities for the rural population. Climate-smart crop varieties should be promoted to maintain sustainable growth of food items to check and fill the gap between demand and supply. A foolproof mechanism should be adopted to monitor either the supply chain of essential items or their pricing from factory to fork or farm to fork to put a cap on inflation.
The author is former Vice Chairman of the Punjab Planning Board and Chairman of ASSOCHAM Northern Region Development Council. He is also Vice Chairman of Sonalika Group. The views expressed in this article are those of the author and do not represent the stand of this publication.