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The Associated
Press reports that high food costs are forcing Indians to do
more with less.
(emphasis mine) [my
comment]
High
food costs force Indians to do more with less
By
ERIKA KINETZ (AP) – 20 hours ago
MUMBAI, India — In India, even the gods are doing without.
Food inflation that has been stuck in the double digits for a year
has had a deep impact on school lunches, family meals and holy offerings.
Anger with high prices erupted into protests this week that
disrupted flights, trains and traffic. While policymakers debate how
to feed people without driving the country deeper in debt, Indians grapple
with the sad arithmetic of how to do more with less.
Fruit is becoming a luxury. People have cut back on protein. Vegetable
sellers complain profits are down because people are buying less.
Take M. Sakkthivel, the cook at a temple in Machimal Nagar, a fishing village
not far from south Mumbai's financial center.
Each day Sakkthivel prepares a pot of sweet ground rice as an offering to
Tirupati Balaji — a south Indian god, who sits on a throne draped with
marigolds.
He used to use 7.7 pounds (3.5 kilos) of sugar to prepare the prasadam, or
offering, but with spiraling prices, he's cut back to three.
Sakkthivel and the local pandit, or priest, have made their own sacrifices to
keep their god in sweets.
"We used to drink tea whenever we wanted," he said. "Now we
avoid it."
The residents of Machimal Nagar say rice, potatoes and onions cost
about twice what they did two years ago.
Officially, food inflation neared 22 percent in December, a 17-year high.
By March it had eased to 16.7 percent, with the cost of wheat 14 percent
higher than a year ago and pulses like the lentils known as dal — a
crucial source of protein in a nation full of vegetarians — up 31
percent.
It's too early to say whether sustained high food prices will aggravate
malnutrition, but advocates worry escalating costs are eroding the diets of
millions in a country where one in two children was malnourished before
the price spike.
"There are large numbers of people who even in good times don't have
sufficient food intake," said Harsh Mander, who was appointed by the
Supreme Court to monitor hunger in India.
He estimates that 80 million to 200 million Indians go to sleep hungry
each night.
Mander is campaigning for a right to food law being debated within the
ruling Congress Party. One version would give poor households the right to 25
kilograms (55 pounds) of grains like rice and wheat each month at 3 rupees a
kilo ($0.03 per pound), which has sparked heated debate over who qualifies as
poor and how much a sweeping food subsidy would add to India's swollen fiscal
deficit.
Existing food subsidies have cushioned the poorest of the poor, but they
aren't pegged to inflation and, plagued by corruption, they don't always
work.
Deepa Sinha, a researcher who works with Mander, said the free rice and 2
rupee ($0.05) per student subsidy public schools rely on to make hot lunches
goes a lot less far these days.
"The dal quantity has come down drastically," she said. "It's
mainly plain rice with a little bit of dal you can't see. There's no
vegetables now."
The government has been quick to blame poor rainfall. Last year's monsoon was
the weakest since 1972, and on Thursday, Finance Minister Pranab Mukherjee
said food prices would likely soften because of good rainfall this year.
But food prices began to rise months before the rains failed. Food
grain inflation has been over 10 percent since December 2008
and fruit and vegetable prices spiked as early as October 2008.
India's deeper problem is a widening gap between supply and demand.
Even as the population grows and increasing wealth fattens many appetites, farm
productivity has stagnated. India's food supply chain suffers from
massive waste and profiteering middlemen whose commissions can account for up
to half the final cost of food.
Eurasia Group analyst Seema Desai says the government could have done more to
keep prices in check.
"When food buffer stocks are at all time highs, particularly wheat
stocks — granaries are overflowing — I'm not sure why they won't
aggressively offload that food into the open market [unfortunately, these
overflowing wheat stocks DON'T EXIST! See *****THE TRUTH ABOUT INDIA'S WHEAT
RESERVES*****]. Why haven't imports been
stepped up more aggressively, particularly rice? [my bet: political
pressure from the US to keep food imports to a minimum]" she said.
The Ministry of Agriculture did not reply to requests for comment.
The government has eased some crop import rules, and an official at the Food
Corporation of India — speaking anonymously because he's not authorized
to talk to the press — said the government has offloaded more
rice and wheat since January.
Desai said the government is moving in the right direction by trying to
reform the food supply chain, clean up the public distribution system and
increase agricultural yields.
But
those fixes will be some time in coming.
Meanwhile, many say their salaries haven't kept pace with inflation.
Pradip Hazra, a government employee in Calcutta, saw his salary go from
25,000 rupees to 35,000 rupees ($563 to $788) a month, thanks to sweeping pay
hikes for civil servants that were widely credited with helping boost
consumer demand during the global downturn.
But Hazra said that wasn't enough. "I used to buy one kilo of fish and
meat each day," he said. "Now I am forced to cut it down to half a
kilo a day."
Most farmers haven't benefited from soaring prices either
because they are small landholders who have to buy food to supplement what
they grow.
Uday Ghosh, a 43-year-old farmer in Hooghly, a grain producing region in the
state of West Bengal, said his income went from 70,000 rupees to 125,000
rupees ($1,577 to $2,815) in the year ending March. He thought he'd be able
to finally afford a microwave. Instead, he's had to pay more for fuel,
electricity and food. "I cannot save much these days," he said.
AP Photo/Rafiq Maqbool
In this photo taken Wednesday, April 28, 2010, Seema Valmiki, 35,
serves watery lentils from a pot at her 6-foot by 8-foot home in Mumbai,
India.
Seema Valmiki, 35, who lives down a narrow lane from the temple in
Mumbai's Machimal Nagar, cares for her three children with the 6,000 rupees
($135) her husband brings home each month as a driver.
Two years ago, she served dal and vegetables twice a day.
"Now, if we have dal, we don't have vegetables," she said. "If
we have vegetables, we don't have dal."
A pot of watery lentils sits on a kerosene burner in one corner of her 6-foot
by 8-foot home.
That was lunch. It will also be dinner.
"Whoever is doing this to make food more expensive, they should
hang," she said. "People who have more salary can manage,
but people like us, who are poor, get caught."
Food inflation is
not popular in India…
Macau Daily Times
reports that food price protests heap up in India.
Food
price protests heap up in India
28/04/2010
01:10:00
Samajwadi activists react while being detained by Indian police in a
demonstration against the price hike of essential commodities in Allahabad
yesterday.
Nationwide strikes over food prices and a protest vote in parliament
heaped more pressure on India’s government yesterday, which is
fighting scandals on several fronts.
The Congress-led government has endured a torrid few weeks after an IPL
cricket controversy that forced the resignation of a minister and a magazine
report about the alleged phone-tapping of senior opposition politicians.
On Tuesday, anger over food prices – up nearly 20 percent
over 12 months – saw buses burnt in the northern city of Lucknow,
protests in southern Hyderabad and a mass strike in the eastern communist-run
city of Kolkata.
In the capital New Delhi, members of the opposition parties behind the
protests staged a sit-in on the steps of parliament with posters saying
“Control Back-Breaking Price Rises.”
“The agitation is a warning to the federal government.
The government must take all necessary steps to bring down the price of
essential commodities,” All India Trade Union Congress (AITUC) leader
Gurudas Das Gupta told AFP.
A no-confidence vote in parliament on the issue of unpopular fuel price
hikes, organised by the parties behind the protests, was expected to fail
with the government seen as having sufficient support.
“Let us see what happens... people are protesting outside and
inside the parliament,” a senior leader from the opposition
Hindu nationalist Bharatiya Janata Party, Venkaiah Naidu, told reporters when
asked about the vote.
“This is a good occasion for us to test the government’s ability
– there is a controversy surrounding the IPL, price rise, phone
tapping. The government has to answer to all of this.”
In a move repeated regularly over the last weeks, the opposition forced the
adjournment of parliament again yesterday as angry MPs leapt to their feet
and shouted over speakers.
…
There were sporadic protests across India yesterday, from
Kerala in the south to Arunachal Pradesh in the far northeast, in which
demonstrators demanded action on high food prices.
In Kolkata, thousands of airport, rail and bank workers went on a
dawn-to-dusk strike, while schools and shops shut and attendance in
government offices was extremely low.
Food inflation stood at 17.65 percent over 12 months in the
second week of April.
Surging food prices have become a major political issue in India,
where complaints about the rising cost of living are common among ordinary
people. A severe drought last year, when the monsoon rains were the weakest
in 37 years, hit farmers hard across the country. This has led to reduced
crop yields, forcing up prices.
Reserve Bank of
India using exchange rate to fight inflation
Outlook India
reports that exchange rate as a tool to fight inflation.
economy: inflation
No
Paper Tiger Economy
Exchange rate as a tool to fight inflation? Don’t bet your
rupees.
Can a stronger rupee help in the fight against inflation?
[Yes, it already has helped fight inflation.] With the Reserve Bank allowing
the rupee to appreciate 15 per cent over the past year, there’s
no doubt this will reduce the import bill in a fast-growing
economy. Global prices of the all-important crude oil have been heating up to
around $80 per barrel. India, a net crude oil importer, has also been
shopping for sugar, edible oil [soybeans] and pulses
in the global market to cool domestic food prices.
Strong capital inflows from overseas have given support to the rupee,
taking it to a 19-month high. The question is how long will the RBI allow
this appreciation to continue? [Answer: as long as people are rioting across
India about, the rupee will continue to appreciate] The central bank insists
it will not use the rupee to battle inflation [IT ALREADY HAS!]. So will it
step in, like it did a couple of years ago, and buy dollars to stem the rise?
[if Rioting=Yes, then Dollar-Buying=No] But wouldn’t that fuel
enemy no. 1: inflation? [Hell yes! If the RBI hadn’t allowed
the rupee to appreciate, the higher cost of food imports would have pushed
food inflation well over 20 percent. If Indians already
don’t like 17 percent food inflation, then chances are they would really
hate +25 percent food inflation]
The debate is on. “I would rather that exchange is
undervalued as China did to boost exports and employment,” avers Suresh
D. Tendulkar, former head of the PM’s economic advisory committee. China,
incidentally, looks like it will let the yuan appreciate, albeit
very gradually, against the dollar. …
The Indian
government and the RBI appear clueless about inflation
The Business
Standard asks are the government and the Reserve Bank
of India clueless about inflation?
T N
Ninan: Getting it wrong
Are the government and the Reserve Bank of India clueless about inflation?
T N Ninan / New Delhi May 1, 2010, 1:32 IST
Are the government and the Reserve Bank of India (RBI) clueless about
inflation? One way to judge is to look at what their leading lights have been
saying. For instance, the RBI governor, D Subbarao, declared last
November that inflation would be 6.5 per cent by March (earlier, RBI
had put out a figure of 5 per cent). The Planning Commission deputy chairman,
Montek Singh Ahluwalia, [The Planning Commission is the premier governmental
body in India overseeing economic development.] declared, also in November,
at the India meeting of the World Economic Forum, that “we are on
target for anything near 5-6 per cent inflation”. The reality for
March has proved both hopelessly wrong, since the figure is 9.9
per cent — an increase from the 8.9 per cent of early November,
when the promises of falling inflation were made.
In November, Mr Ahluwalia had gone on to say that the real worry was food
price inflation, which too he expected would come down by the end of the
financial year [March 2010]. Wrong again, because the reality
is that food price inflation has gone up, not come down —
from 13.3 per cent in October to 16.6 per cent in April.
Others were closer to the mark. The prime minister said at a meeting of chief
ministers in early February that “the worst is over… we will soon
be able to stabilise food prices”. He was right, in that food price
inflation in February was 17.6 per cent. The Cabinet secretary went a step
further at the end of March, declaring that sugar, edible oil and lentil
prices were now falling, while grain and vegetables were stable. The
problem is that the government’s statistics don’t catch this,
because inflation numbers compare current prices with those of a year
earlier; there is no indexed comparison of prices with the previous week or
month. Nor is there any adjustment made for seasonal factors — you
would expect post-harvest prices to be lower than pre-harvest, but that
may not mean any real change in underlying inflation trends.
…
On the evidence at hand, therefore, it is clear that both the
government and RBI erred in their judgments on what was required of fiscal
and monetary policy. The easy cop-out of blaming a bad harvest and
international price movements is not convincing, since the forecasts of low
inflation were made well after the monsoon season was over. The
result is that the country now has a bigger inflation problem than it
had been led to expect, and no one now knows when inflation
will drop to the comfort zone of 5 per cent. Certainly, no one in the
government is making confident forecasts of the kind we saw in November.
…
Inflation going
to get worse
The
Financial Times Blog reports about India's soaring inflation sore.
India’s
soaring inflation sore
April
29, 2010 8:00am
When Indian politicians can’t sleep at night, their minds worry not
about possible conflict with neighbouring Pakistan, nor the strategic weight
of next-door China, but rather the soaring price of lentils in the
local market.
Inflation is a political killer in India - where
price-sensitive consumers, many of whom spend up to 50 per cent of household
income on food, come down heavily on governments that can’t keep prices
under control.
In March, India’s Congress-led government managed by a whisker to
avoid the ignominy of reporting that inflation had hit double-digit figures,
as the Wholesale Price Index, the main indicator of inflation, came in at a
17-month high of 9.9 per cent.
But one respected economist for a major Western investment banks says actual
inflation - including both food and non-food items - is a quite
a bit higher - maybe as much as 2 per cent - than what is claimed by the
government’s Central Statistical Organisation, with its
sluggish data collection methods.
Cement prices, for example, have increased around 15 per cent across various
parts of India in the last three months, while steel prices were raised 25
per cent in January and February of this year.
Yet so far, neither of these two major price hikes has yet been
factored into the WPI, since the CSO relies on voluntary - and
often delayed reporting - by companies to measure the index, unlike
in the US, where companies are required to report such data on time.
That means for all Indian policy-makers efforts to talk down inflation,
and their soothing suggestions that it has already peaked, the numbers
are likely to jump in the months ahead. But with politicians
eager to downplay the impact, don’t expect the CSO to get more
aggressive about collecting timely data any time soon.
My reaction: India
is going hungry.
1) Food inflation in India, stuck in the double digits for over a year, has
had a deep impact on school lunches, family meals and holy offerings.
2) While the government has eased some crop import rules and sold what crops
it actually does have (see *****THE TRUTH
ABOUT INDIA'S WHEAT RESERVES*****), these steps
can’t resolve India's deeper problem: a widening gap between supply and
demand. As India’s population and wealth have grown (increasing
demand), farm productivity has stagnated.
3) Rice, potatoes and onions cost about twice what they did two years ago.
4) Salaries haven't kept pace with inflation; forcing people have cut back on
what they eat.
5) Soaring food inflation is eroding the diets of millions in a country where
one in two children was malnourished before the price spike.
6) 80 million to 200 million Indians now go to sleep hungry each night.
"Whoever is doing this to make food more expensive, they should
hang,"
Inflation is a political killer in India
1) When Indian politicians can't sleep at night, their minds worry about the
soaring price of lentils in the local market.
2) Price-sensitive Indian consumers (many of whom spend up to 50 percent of
household income on food) come down heavily on governments that can't keep
prices under control.
3) Anger with high prices erupted into protests this week that disrupted
flights, trains, traffic, and parliament.
4) Last Tuesday, anger over food prices saw buses burnt in the northern city
of Lucknow, protests in southern Hyderabad and a mass dawn-to-dusk strike in
the eastern communist-run city of Kolkata. In sporadic protests across India
(from Kerala in the south to Arunachal Pradesh in the far northeast),
demonstrators demanded action on high food prices.
5) With people are protesting outside and inside the parliament, surging food
prices have become THE major political issue in India.
Reserve Bank of India using exchange rate to fight inflation
1) The Reserve Bank has allowed the rupee to appreciate 15 percent over the
past year, which has help reduce inflation.
2) Without the 15 percent rupee appreciation, the sugar, edible oil
(soybeans), and pulses which India has been importing to cool domestic food
prices would have been more costly, and food prices in India would be even
higher than they are already are.
3) As long as people are rioting across India about inflation, the RBI will
allow the rupee's appreciation to continue.
The Indian government and the RBI appear clueless about inflation
1) Last November, the RBI governor, D Subbarao, declared that inflation would
be 6.5 percent by March, and Montek Singh Ahluwalia, deputy
chairman of the Planning Commission (the premier governmental body in India
overseeing economic development), said that India was “on target
for anything near 5%-6% inflation”.
The reality: March inflation was 9.9 percent
2) Also last November, Montek Singh Ahluwalia predicted that food
inflation would come down by the end of the financial year (March 2010).
The reality: food price inflation has gone up from 13.3 percent in
October to 16.6 percent in April.
3) The government has been quick to blame last year's poor monsoon (the
weakest since 1972), but food prices began to rise months before the
rains failed. Food grain inflation has been over 10 percent since
December 2008.
4) Both the government and RBI erred in their fiscal and monetary policy.
India now has a bigger inflation problem than it had been led to expect, and inflation
is unlikely to drop to the comfort zone of 5 percent anytime in the near
future.
Inflation going to get worse
1) In March, India's Congress-led government managed by a whisker to
avoid the ignominy of reporting that inflation had hit double-digit figures.
(The Wholesale Price Index (WPI), the main indicator of inflation, came in at
a 17-month high of 9.9 percent)
2) Unfortunately, actual inflation is a quite a bit higher (maybe as much as
2 percent) than what is claimed by the government's Central Statistical
Organisation (CSO).
3) For example, Increased in Cement prices (15 percent) and steel prices (25
percent) have yet been factored into the WPI because the CSO relies on
voluntary (often delayed) reporting.
4) For all Indian policy-makers efforts to talk down inflation and their
soothing suggestions that it has already peaked, inflation numbers are
likely to jump in the months ahead.
Conclusion: The 2010 Food Crisis has
already begun in India, and, while things seem bad enough already, the
situation is going to get much worse the coming global food shortages this
summer.
Eric de Carbonnel
Market Skeptics
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