|
Bagful of money fetches handful of goods
Price rise makes life a plight for common man
By Geeta
Many of the agricultural commodities like rice, wheat and pulses are traded in the forward market without physical delivery. Traders and brokers buy and sell, say in June, the September contract or October contract.
Ask any economist about the inflation rate in India; he would tell you that while it is well under control, the inflationary expectations are worrisome. Even the Reserve Bank of India has demonstrated this concern when it raised the overnight Reverse Repo (rate at which it accepts funds from the banks) to 5.75 per cent and Repo rates (rate at which the central bank lends) to 6.75 per cent.
Ask any stock analyst about the major concern among the global markets, he would pinpoint it to the worries around interest rates and the inflationary expectations. This is the worry which seemingly triggered the crash in the emerging markets including India.
The answers from both an economist and a stock analyst would, more or less, converge on the concerns about the inflationary fears, partly coming from an extra-ordinarily high level of energy prices.
Ask any housewife in Delhi, Chennai, Bangalore, Mumbai, Hyderabad or Pune. She will not stop herself at raising those concerns. She will throw the choicest of abuses at anyone who would dare tell her the inflation is under control. Mind you, she is not merely being emotional. Price list in the grocery stores would prove her right. No variety of pulses - be in Arhar, Rajma, Moong, Urad, Chana or Malka - is selling at less than Rs 50 a kilo. Some of these pulses like Chana dal, Urad Dal and Rajma are selling at above Rs 60 a kilo. The price hike in these pulses has been to the extent of 30 per cent, in the last two months. Not much has changed as regards supply side of the essential food products, including vegetables. India has historically been importing pulses and the international market has not been on fire. Why is it that the prices in the domestic market have shot up? These were market rates before the government announced a sharp rise in the prices of petrol and diesel in the first week of June. The cascading effect of the increase in the transportation cost is yet to be factored in.
What is the problem then, besides of course the inefficient handling by the government? In fact, the government has been charged with promoting speculation in the forward commodities markets that largely trade in food articles, a phenomenon relatively new in the Indian market. Many of the agricultural commodities like rice, wheat and pulses are traded in the forward market without physical delivery. Traders and brokers buy and sell, say in June, the September contract or October contract. While the government and economists argue that the forward markets could work to the advantage of the farmers since it indicates the pricing level well in advance, the wholesale commodity traders (those who deal in physical trade) point out that too much speculation builds around certain commodities much before the crop arrives. There was almost a scam around Urad dal trading in the forward market. If not well regulated, the commodities market could overshadow the stock market in terms of the bull and bear run.
The government has set up the Forward Market Commission to regulate the forward markets. But then, allegations of excessive speculations reflect in the runaway rise in prices of the essential commodities impacting the common-man?s monthly budget.
Even if we go by the official figures, as captured by the Wholesale Price Index, the inflation rate went by over 150 basis points from 3.2 per cent during the week ended April 8, 2006 to 4.7 per cent for the week that concluded on May 27. This is about a time period of less than two months. Again, these figures do not capture the petroleum price hike which will further hit the housewife?s budget and the commuting expenses of the family members- working parents, school-going children and college kids. In a city like Delhi, the average commuting bill of working parents has gone up between Rs 500 and Rs 1000 per month.
?The prime reason for the rise in inflation was the sharp rise in prices of primary food articles, such as rice, wheat, bajra, barley and pulses like gram, moong and masur. The upward spiral in prices of milk and fish also contributed substantially to the rise in inflation. Price of vegetables and fruits and oilseeds also recovered in the third week of May, 2006'?, said the Centre for Monitoring Indian Economy in its monthly review of the economy.
Inflation was not restricted to the primary articles. Manufactured products like edible oils, paper and paper products, synthetic detergents, man-made fibres and metals like aluminium and zinc also became dearer in the last two months. For a family of four, the monthly grocery and milk bill has gone up at least by Rs 1500, while no accretion has happened to the income. Barring a few high profile jobs, the salaries have remained stagnant with measely increment of Rs 400 to Rs 500 per month for a person earnign Rs 20,000 a month. How about those earning Rs 4,000 or Rs 5,000 a month? Life in big cities is becoming unbearably difficult and there are no job opportunities in the villages.
You may dismiss a housewife?s claim as ?emotional? but what about the figures compiled by the government. According to official figures, the year-on-year increase in prices of ?other food articles? (there is a category like this in WPI compilation) went up by 27.03 per cent as on May 20,2006. Prices of condiments and spices have started increasing since April this year. The annual rate of increase was 16.49 on May 20 while for eggs, meat and fish it was 11.70 per cent.
That was largely about the primary food articles. What about commodities like cement, so essential for building your house, an area which the government says is a priority sector. Cement prices went up by over 50 per cent in the last six months and Commerce and Minister Kamal Nath gave a ?warning? to the manufacturers to drop the prices. No-one knows what transpired between the Cement Manufacturers Association and the Commerce Minister. But what we know is that Mr Kamal Nath has started softpedaling the issue.
From Rs 161 per 50 kg bag in January 2006 the cement prices went up to Rs 201 per bag in March. The manufacturers made a killing and their net profits went up ranging from 100 per cent to 4000 per cent in fiscal 2005-06 while the government was watch helplessly.
Prices of essential commodities like wheat are not likely to come down as the game is running out of the control of the government and falling into the hands of multi-national companies which have started marginalising the agencies like the Food Corporation of India. Till 15 May 2006, wheat procurement by the government agencies was at 9.5 million tonnes against 14.7 million tonnes during April-May 2005. This was despite higher estimate of wheat production of 71.5 million tonnes during 2005-06 against 68.6 million tonnes during the previous year.
The buffer stock effort being made through imports is not going to help either even as the government has allowed the shipments in byepassing the sanitary and phyto sanitary norms. Besides, the imports would surely impact adversely the interest of farmers who would in the near future face a dumping of the foodgrains.
|
