Many have asked me the reasons for the Inflation in India is showing as less than 2% while the ground reality of food prices at the ground level is that the inflation is anything between 12-18%, if not more.
The reason is simple. India measures national inflation based on the Wholesale Price Index (WPI). The weightage for food items is just above 15%. However, if one were to calculate the Retail Price index, food items have more than 57% weightage. Hence the disparity.
However, this do not explain the real reason for the shortage and high prices of food items in India. True, the monsoon failed. But monsoon has failed before, but India has not felt the pinch in earlier years. Onion is selling at Rs 38 per kg as compared to Rs 15 a month bag, rice is vanishing from the market and pulses are scarce and expensive. The production shortfall due to poor monsoon do not justify such a price hike at the retail level.
The blame has to be placed at the Government systemmatically destroying the public distribution system (PDS) over the past decade and a half. India had one of the better public distribution system of essential food items, despite complaints of pilferage and poor quality. Today, perhaps only Kerala can boast of the PDS and its chain of maveli stores that gives relief to the poor and the middle class. It is time Government had a serious look at restructuring the PDS at a national level, so that this can be used as a Plan B in the event of spiralling prices. The other main culprit for the rising retail prices is the Retail majors like Reliance etc. Since the farmers are producing enough, but not getting additional payment and there being a scarcity at the retail level, one has no choice other than to point fingers at retail chain giants, who are purchasing in bulk, but storing them and not releasing sufficient stock whereby creating a shortage artificially. Since most of them are big corporates, people are afraid to call them what they used to of wholeseller banyas in olden days -Hoarders and Blackmarketers!
Are we seeing the real dark side of liberalizatoin???
