Once again the government has released inflation rate data based on Consumer Price Index (CPI) and once again it has been said that retail inflation rate has increased due to increase in prices of food items. Whenever the inflation rate increases, almost every time the reason is that the prices of food items have increased. This time the data that has come i.e. for September, 2024 states that the food inflation rate has increased from 5.66 percent to 9.24 percent. For this reason, the retail inflation rate for the month of September increased from 3.65 percent in August to 5.49 percent.
Obviously, food grain inflation had a role in the increase in retail inflation in August also because food items account for 50 percent of the inflation rate. However, in September, the prices of food items broke records. Inflation of food items reached 9.24 percent i.e. close to double digits. The highest inflation was seen in the prices of vegetables, which increased from 11 percent in August to 36 percent in September. Just imagine, the price of vegetables has increased by 36 percent in the month of September! In September, the inflation rate was about two percent higher on a monthly basis and about one percent higher on an annual basis.
The first question that comes to mind from this data is whether the production of food items is decreasing or is there some disturbance in their supply chain, due to which the prices of these items are increasing? Keep in mind that the general rule of economics is that prices increase or decrease due to the difference in demand and supply. If demand is low and supply is high then the price will be low and if supply is less then the price will increase. But in the case of food items, the opposite is happening. Record production of food grains is taking place in the country. The production of everything food and drink is increasing. Despite this, prices are continuously increasing instead of decreasing. This means that there is a disturbance somewhere in the supply chain or the prices are being artificially increased through hoarding.
If so, then it is a big crisis and the food security of the country will be in danger. The government should wake up and try to stop it immediately because if prices are increased artificially, both farmers and common consumers suffer losses and middlemen or hoarders benefit. If prices do not come under control, it is not possible for the central bank to cut interest rates and high interest rates affect the growth rate. This means that artificial inflation is not good for farmers, consumers and the country’s economy.
Regarding artificial inflation, first of all if we talk about vegetables, it is true that this year there has been more rainfall than normal but there has been no news of crop getting damaged due to rain anywhere. Nevertheless, the inflation of vegetables has increased by 36 percent in September. If we go into details of this data, we will find that the inflation of onion and tomato has increased the most. The prices of both onion and tomato have increased by 78 percent. That means the prices of onion and tomato have increased at twice the rate at which the inflation of vegetables has increased. Wholesale inflation of vegetables has also increased by about 50 percent. When crops were not destroyed and production was not reduced, then how did their prices increase so much? Keep in mind that the government’s own data shows that the production of these three vegetables – potato, onion and tomato – has been increasing at a record rate in India for the last decade. India has overtaken China to become first in the production of onion and is second in the production of potato and tomato. Still their prices are not decreasing. It is not that the people of India have started eating more potatoes, onions and tomatoes than before. According to the data of the Reserve Bank of India, the share of vegetables in the monthly expenditure of the people in India has remained stable at three to four percent for the last decade. As far as exports are concerned, only two percent of the potato and tomato production in India is exported. The export of onion is definitely a little more. But that too is less than 10 percent. This means that production is increasing, domestic consumption is not increasing, exports are also stagnant yet prices are increasing!
It is not that this situation is only in the case of vegetables. The situation is similar in other food grains also. There is also record production of wheat and paddy but their prices are also not decreasing. This year, 11.30 crore tonnes of wheat was produced, which is more than last year’s 11 crore tonnes. It is a different matter that government procurement was less this year. Because farmers did not give wheat to the government, the government could purchase only 266 lakh tonnes of wheat, whereas the target was to purchase 320 lakh tonnes. Less wheat arrived in the government warehouse, which means that private traders bought and stored more wheat in the market and artificially increased inflation. Till September, the prices of wheat have increased by Rs 100 per quintal and the price of flour has also increased by Rs 3 to 4 per kg. This affected breads of all brands in August and their prices increased.
Now the important question related to this is that if the prices of food items and vegetables increase, does the farmer benefit from it? The Reserve Bank of India has given the answer to this recently. The Reserve Bank has told that farmers get only one-third i.e. 33 percent of what we, the common consumer, spends on potatoes, onions and tomatoes. According to the data of the Reserve Bank, almost the same amount of money is taken away by commission agents i.e. wholesalers. After this, street vendors, street vendors or retail traders of vegetables get one-third share. Think about the poetry of Sudama Pandey ‘Dhumal’! A man rolls rotis, a man eats rotis, there is a third man too, who neither rolls rotis nor eats rotis, he just plays with rotis, I ask – who is this third man, Parliament of my country There is silence. He is the third wholesaler and retailer, in whose pocket all the money is going. Farmers are not getting fair price for their crops and the burden of food inflation on consumers is also increasing. To fix this, strong storage arrangements will have to be made immediately, middlemen will have to be controlled and the supply chain will have to be improved.