food inflation

© Gurukrushna Patnaik

Food InflationPrice Hike In Food Commodities

Gurukrushna PatnaikAIMIT,

Bangalore


Topics to Discuss• Price rise: An economist's view.

• Grocery Bill.

• Money Vs. Goods.

• Positive effect of Hoarding.

• Onion price rise – A critical issue.

– Way back in 2010 and history

– Situation at present

– What is causing the price rise of onions in India?


Price rise: An economist's view

• Rising prices are like a fire feeding on itself.

• In turn, it brings down productivity leading to

further inflation.

• In any discussion of food price rise, we take

drought, as a reason for it.


Tighten Your Purse Strings


Grocery Bill• High inflation has been pinching you for more than

a year now. Now, the weakening rupee has made crude oil, fertilizers, medicines and iron ore, which India imports in large quantities, costlier. Though these items are not for your daily consumption, they impact your finances indirectly.

• For instance, since India depends on imports for a large part of crude oil it consumes, a weak rupee will influence petrol and diesel prices. "Fuel being directly connected with the cost of transportation, prices of goods that are transported from one part of the country to another, such as food, are bound to rise. This will have a direct impact on the household budget.


1 Year Crude Oil Prices

Money Vs. Goods• In economists' parlance, the main culprit happens to be

inflation.

• If money exceeds the value of commodities available in

the market, the prices are bound to go up.

• Inflation

– Faulty planning with wrong order of priorities.

– Inadequate production of goods in demand.© Gurukrushna Patnaik


Cont..• Inflationary situation is further aggravated by

unimaginative import and export policies.

• Improper imports and exports to domestic market,

further increase in prices.


Positive effect of Hoarding• Monsoon is always the big issue.

• Observing less production, hoarders became overactive,

thereby leading to further price rise.

• Hoarders strike a balance between the current price and

future price.

• In late monsoon or less production, food prices rise

drastically.

• It is the hoarders who actually help maintain some sort

of an equilibrium.


ONION PRICE RISEA critical issue


Onion Price Rise• An onion, today being compared with

diamonds.

• India is the second largest producer of onion having 19% share of the global onion production.

• The price of onion has shot up from Rs 20 per kg to Rs 70 per kg in some parts of the country.

• 245% rise in the wholesale price of onion this year, has given an unpredicted turmoil in inflation.


Way Back in 2010• India had seen a dramatic increase in onion price

across all the markets in 2010.

• The cause of price hike was the delay in reaching

onions to the markets.

• Unpredictable rainfall that led to the shortage in the

production .

• Political stress was created.

• Hoarding and price increased by traders were also

blamed for the same.


Situations at Present• Due to speculations, traders might have increased

the price to earn profit.

• Traders exploiting and taking advantage of the

seasonal shortage in supplies.

• The supply of onion falls to 3,000 quintals on

Monday as compared to 6,000 quintals on

September 6.


Cont..• Wholesale price of onion increased per quintal from

Rs 4,140 to Rs 5,300.

• In Mumbai and Delhi the Wholesale Price increased

by Rs 1,000 per quintal.


Cause for Price Rise• Hoarding – Trader-intermediaries who operate in

groups encourage hoarding to keep the prices high.

• Mismanagement – Improper supply chain and needs to be managed for a regular supply.

• Inflation – Recent fuel price increase has pressurized the

common man to by household things.– increasing the minimum export price (MEP) would

help in lowering down the price of onion.

FAO food price index


food inflation

Education

wholesale price of onion

price rise of onions

current price

future price

gurukrushna patnaik

discussion of food price

cause of price hike

minimum export price