India's food inflation hardens
By Kunal Kumar Kundu
BANGALORE - Despite much talk by Indian ministers and policymakers of easing
food price inflation, the food price index (which has a weighting of over 15%
in the wider wholesale price index) rose at an annual rate of 11.47% in the
week ending August 28, increasing from 10.86% the previous week. This is
nothing short of catastrophic for Indians, and particularly for the poor.
For a better perspective, it is important for readers to know that a new method
of calculating poverty (as suggested by Professor Suresh Tendulkar) recently
pegged India's poor population at a remarkable 37% plus (a 10% jump from the
previously stated official number).
Even that may be on the lower side. Yet if we go by this data, that means more
than 400 million Indians are poor. When one
considers the fact that at the time of India's independence, India's total
population was 330 million, it's quite shocking to think that the equivalent of
the whole of independent India is poor.
It is also clear that inequality in the Indian society has gone up manifold.
The best way to understand this is by looking at India's Gini coefficient. The
coefficient, a widely used measure of a country's inequality of income or
wealth, ranges between 0 and 1, where 0 implies perfect equality and 1 connotes
total inequality.
According to International Monetary Fund estimates based on NSSO (National
Sample Survey Organization) data, whereas India's Gini coefficient was at one
time declining steadily, it rose (that is, inequalities worsened) during the
reform period following the mid-1990s and the rise was quite substantial.
It is also important to note that poverty in India is very different from the
notion of poverty in the West, where numerous state agencies and benefits can
ameliorate conditions for even the most poor. In India, with such a high level
of abject poverty, rising inflation will result in more incidences of
malnutrition, stunted growth and death.
A deeper look into the reason for the spurt in food inflation shows that a
contributing factor was the loss of production in some goods due to flooding in
parts of the country.
That brings to the fore a basic question. How does the government expect a good
harvest to bring down inflation? Time and again, I have talked about various
inadequacies - read structural deficits - plaguing the food network, created by
inadequate investment in agriculture, an abysmal distribution mechanism,
horrific storage facilities and so forth. Together, these stubbornly ensure a
high food price.
Only when the monsoon is really adequate (when the deviation in spatial
distribution is less) is there enough production to give some relief. This
year, the government is playing the normal monsoon card to persuade people that
food inflation will soon be under control. I question the very concept of a
"normal" monsoon.
As was mentioned in my previous article, quite a few Indian states are
suffering from drought while others suffer flooding. (See
Sheen wearing off Indian growth, Asia Times Online, September 3, 2010).
Put another way, there is a highly insufficient monsoon in some states and a
much more than desired monsoon in others. Statistically, India will still have
average monsoon. But ask the farmers impacted either way.
Yet, the government is optimistic that a bumper food crop will bring down
inflation levels. The fact is, by the time it should have had some impact,
India will be back to square one.
Kunal Kumar Kundu is Senior Practice Lead - Knowledge Services Division,
Infosys Technologies Ltd. The views expressed here are those of the author. His
writings appear at http://kunalsthoughts.weebly.com.
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