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n a weekend day, I thought I would be able to catch up with some of the developments that I may have missed from both the domestic and international arena, and then possibly also take some rest, too. But like many of you, I too was pushed out by my better half to get some groceries.
We all have to, you see, sometime or the other….
Not accustomed with the prices of groceries, I called my wife to check if the prices of jowar, grams and few other items were charged correctly by the nearby grocer.
“What?” My wife shouted from the other end. “How come the prices have risen so much! Barely few months ago, these used to cost almost 30-40 per cent less…”
High food grain prices do not leave any option. We have to buy them. Like the Reserve Bank of India (RBI) Governor, we all too hate inflation, but have learned to live with it, grumbling or other wise.
In UK, food prices are accelerating at their highest rate for 14 years - and running at more than three times the rate of inflation, official figures show, reported Telegraph of UK a couple of days ago.
And the Central Bankers all over the world – including our own Reserve Bank of India (RBI) – thought that they along with their politicians - have succeeded in containing the inflation dragon from inflicting more economic wounds across the globe. That our pockets are being pinched by the inflation dragon is none of the concern of RBI or any of the Central Bankers or their politicians.
RBI Governor Y V Reddy recently said that RBI hates inflation… and that RBI has been successful in maintaining inflation in India at around three per cent levels. Though down from over five per cent few months ago, inflation dragon in India has begun to raise its head and currently is said to be be high at around 3.75 per cent.
In USA too, the Federal Reserve is concerned about its ability in priming the US economy and also how to contain the rising inflation reflected in rising cost of gasoline, clothing & food among other products. After the recent round of cut in interest rates by Fed Reserve, the stock markets worries about inflation has increased that is reflected in Dow Jones shedding off 178 points on Friday (December 14, 07).
Having barely managed to learn to live with the inflation dragon, we are collectively expected to live with yet another of its kin - AGFLATION – agriculture + inflation - or the era of rising food prices led inflation.
Retail levels food prices all around the world - and so also in India – have been rising, and will continue to rise even further in future. So what if RBI, its governor, or its masters in the South Bloc (that houses finance ministry in India) hate inflation? Food prices have their own reasons and logic to rise or fall, irrespective of the likes and dislikes of the Central Bankers.
Apart from the collective greed of the retailers, packers and traders whose prices of food items have nothing to do with the farm gate prices and the farmers are not better off with the kind of rise in food prices we are forced to shell out these days, I can think of two other reasons for the rise in food prices:
One, the overall rise in demand for food with rise in population across the world, and more so in the developing countries where the consumers are witnessing increasing amount of disposable incomes that constantly nudge them to buy more and more, also of food, dairy and liquors from the mushrooming shopping malls in their vicinity.
Two, and this is a global phenomenon – increased use of food products – sugar, maize/corn, soybean seeds, palm furit, etc - for bio fuels in the hope that these bio-fuels would compete with the costlier fossil fuels. No one has yet however, calculated the cost to the society of bio-fuels v/s the fossil fuels, and not just at the petrol pump but across the society.
And while the Indian government is busy making space for the sprawling shopping malls and trying hard to find ways to convince the rising opposition to its policy to allow more foreign direct investment (FDI) in retail space, and the US government is happy giving subsidies to the farmers to grow more food grains that can be diverted for bio-fuels, my wife, like those of many of you out there, are shouting in vain as to why food prices are rising so fast.
Surprising, but true, the US house prices are plunging, but the food prices in 2007 have risen the maximum in 34 years!! And what is more, USA, the world’s largest food exporter has been the biggest gainer by earning over $18 billion in food exports.
In India, the government is un-flinched with the rising instances of farmers committing suicides, or for that matter the rising food bill for the consumers. It is busy finding ways to fill its granaries by buying food grains from the USA!!! And shelves at mushrooming shopping malls in India are finding more and more food items from foreign countries…
Yes, there is more to Agflation …
