THE way food inflation has surged to a 10-week high of 14.44 per cent for the week-ended December 18 only an indifferent government could be unperturbed. Prime Minister Dr Manmohan Singh had once said quite famously that he does not spend sleepless nights over a tumultuous stock markets. The way he has maintained a stoic silence over the spiraling prices of vegetables, particularly onions, fruits, cereals and protein-based products, it is hard not to draw an analogy.
The food inflation was pegged at 12.13 per cent in the previous week, but this is the fifth consecutive week when the price of food items has increased inexorably. During the same week last year too, with some active machanisation by a few Union Ministries like the Food and Agriculture, food inflation had touched 21.19 per cent.
The strategy seems to be to obfuscate serious issues with another. If you watch news channels or read the front page of the newspapers, scandals after scandals running into lakhs of crores of rupees have occurred. Other than muted posturing the government seems to be unwilling to take any concrete steps. Asking the Union ministers found with the hand in the till is supposed to be the only action worthy of this government.
And as seen in Maharashtra ministers who resign on grave charges are brought back in active ministership or in any other similar political role after a few years in exile. Vilasrao Deshmukh, former Chief Minister of Maharashtra, who had resigned under a cloud for mismanagement during the Mumbai attacks by Pakistan-led terrorists, was back in the race for the post when Adarsh scandal broke out in Mumbai. On price rise issue, the larger scandals have completely relegated inflation to the back pages or after-the-break TV news.
Onions had to be imported from Pakistan at a ridiculous price of Rs18 (inclusive of all the customs levies, cess and transportation costs). According to government data released on December 29, onions became costlier by 4.36 per cent (annualised), whereas on a week-on-week basis the increase was 3.49 per cent. The rise in prices of vegetables on an annualised basis was 5.78 per cent, while it was 4.58 per cent on a weekly basis.
During the week under review prices of fruits rose by 19.01 per cent, while milk became 24.64 per cent costlier on a year-on-year basis. Similarly, on an annualised basis, eggs, meat and fish prices rose by 31.21 per cent! On the other hand, prices of cereal went up by 7.77 per cent year-on-year, while pulses grew 13.82 per cent dearer.
On other essential commodities like rice, the price rise was about 7.36 per cent year-on-year and while wheat became dearer by 8.32 per cent. Only a few weeks ago, the government was gloating in confidence over the bountiful rains that would bring food prices down.
What gives credence to accusations of price manipulation by the government is that food prices have not spiraled abroad as much as in India. Last time, during the boom period of 2006-07 food prices across the world had shown a sharp uptick owning to the economic growth in countries like India and China where consumption had far outstripped production.
Even then President of the United States George W Bush had laid the blame of price rise squarely on developing countries like India and China. But this time round, even though food prices have risen only marginally the world over, and in some cases the prices have actually come down, resurgent inflationary pressure has made the Union Government look helpless. The helplessness could be owning to the fact that the ministries are themselves involved in manipulations.
On policy matters, the high food inflation could prompt the central bank to hike key short-term rates at its policy review next month. RBI Deputy Governor Subir Gokarn dropped dark hints last week about tightening monetary measures as a reaction to the unbridled inflation in food items. The headline inflation, the Reserve Bank of India has conceded, is not easing as fast as it would like, and the upside risks still remain high.
Needless to say, the rise in food inflation will in all likelihood, have serious repercussions on the final WPI inflation figures for December. Hence, there are more than one ways to look at the price rise in food items. People, on the other hand, have lost faith in a government so caught up in a bind over various multi-lakh-crores scandals of various ministries. Probably the least the voters would expect is for the government to call for mid-term elections to gauge if it has got any support left even in its own ranks.