The latest spike in wholesale food prices is largely driven by seasonal factors, since the supply of green vegetables is lower now. It does not imply that farmers are earning more
The latest numbers on wholesale prices released by India’s commerce ministry on Tuesday show that food price inflation quickened to 7.4% in April, the highest in 33 months, driven by rising prices of vegetables (41%), pulses, wheat, and meat products. Is this something to worry about? Not really, if one looks at how food prices have moved in recent years. Here are the numbers for annual wholesale food price inflation in the past five years, beginning 2014-15: 5.6%, 2.6%, 4%, 2% and 0.4%. It is clear that food prices have barely budged.
This can be traced to several factors, price suppression among them. Under the watch of a government with a hawk-eyed policy on inflation, food prices have been kept under a tight lid. While economic theory says price levels can be kept stable without hurting anyone, the effort here has taken a severe toll on farmers, many of whom have seen their incomes stagnate or decline. Note that in April, retail food inflation, at 0.7%, trailed headline inflation recorded at 3.4%. Consumer expenses on farm produce aren’t rising.
The latest spike in wholesale food prices is largely driven by seasonal factors, since the supply of green vegetables is lower now. It does not imply that farmers are earning more. If anything, the new numbers are just a reflection of food prices returning to their usual trend. After a prolonged phase of deflation (for many items), this might even spell some relief for farmers. The new government should think twice before it responds in a kneejerk manner to this recovery in prices—say, by allowing imports or cracking down on traders. Yes, there are fears of a deficient monsoon this year, but the government can easily deal with it by drawing upon its stocks of grains and pulses.
