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The Economic
Times reports that violence erupts against rising food
prices in Eastern India.
(emphasis mine)
Bihar
faces food price discontent, violent protests
28 Jan 2010, 1552 hrs IST, REUTERS
NEW DELHI/PATNA: Violence erupted against rising food prices in
Bihar on Thursday, heaping more political pressure on the government
to focus on inflation rather than growth and financial reform.
Mobs stoned trains and jammed roads with burning tyres in Bihar, trying to
enforce a day-long shutdown.
Shops, offices and schools remained closed on Thursday, when official data
showed that food prices in Asia's third-largest economy rose an annual 17.4
percent in mid-January.
At least 12 passengers were injured when angry crowds stoned a train in
Hajipur town, while thousands marched in the street in different parts of the
state asking shops to shutter.
"Their anger is natural," said Lalu Prasad, head of the
Rashtriya Janata Dal (RJD) party, referring to rising food prices.
Food prices have soared because last year's monsoon rains,
which irrigate 60 per cent of farms, were the worst in 37 years.
Higher prices paid by government agencies to buy grains from farmers have
also helped push the headline inflation rate to 7.31 per cent in December,
the highest in a year.
Inflation and a high fiscal deficit are major risks to the country’s
ambitious plan to return economic growth back to the 9 per cent a year level
seen between 2005-06 and 2007-08.
A focus on inflation may also distract the Congress party from pushing
reforms such as the liberalisation of the agricultural sector that may help
cut the fiscal deficit, which is projected to rise to a 16-year high of 6.8
per cent of GDP in 2009-10.
POLITICAL FALLOUT
Food prices have been key to political survival in the past. Onion
prices helped push out a state government in 1980.
Now, the volatile issue has given opposition parties a handle to attack
the government, giving BJP a credible issue against the ruling party, which
draws its support from a large chunk of India's rural poor.
"It’s the biggest headache for the government right now," said
Saibal Gupta, secretary of Asian Development Research Institute, a private
think tank.
Analysts say Prime Minister Manmohan Singh's government needs to walk a
fine line, trying to please farmers, who want higher prices for their
produce, and consumers, who want prices to fall.
"If (rising prices) not tackled in time ... the government may
also have to suffer political reverses in states where elections are
due."
Local elections are scheduled in Bihar and West Bengal states over the
coming year.
With public anger focused on high food prices, opposition parties may
disrupt parliament proceedings, further delaying debate on bills such as
those on land acquisition and entry of private players into the pension sector.
Milk to get
dearer in India
Bloombergutv.com
reports that milk to get dearer in India.
Inflation
rears up; milk to get dearer
Himani
Kaushik, Bloomberg UTV
Published on Jan 20, 2010
NEW DELHI: The rising food price continues to put pressure in inflation. Now
government is admitting that even milk prices are set to rise due to poor
production.
Having a cup tea has never been so expensive as milk price are set to
climb up. While government continues to battle escalating food prices
especially of sugar and pulses, Agriculture minister Sharad Pawar indicated
on wednesday that the cost of milk would also increase in Northern India on
account of a dip in milk production. India is facing shortage of nearly
18 lakh tonne of milk due to low production.
The Hindustan
Times reports that milk going sugar way, dairies cry
shortage.
Milk
going sugar way, dairies cry shortage
HT Correspondent, Hindustan Times
Delhi, January 20, 2010
Signs of milk prices firming up due a shortage in north India became
evident after a state dairy ministers’ meet on Wednesday, with
Agriculture Minister Sharad Pawar doing a flip-flop on whether prices could
rise.
Dairies in some northern states were pushing for higher milk prices due to
scarcity. On this, Pawar said: “Unless there is a decision (on
hiking prices), I do not know whether the states will be able to procure
(milk) to meet the demand.”
Within hours of the statement, Pawar was widely quoted as saying that milk
would be costlier, upsetting consumers battling a food price spiral. Later,
Pawar said all he meant was that states might have to take a call on
increasing prices to ensure availability.
Milk production in India, the world’s largest producer at 108 million
tonnes in 2009, has been growing at an average of 4 per cent. Supply-demand
forecasts for 2010 had hinted normal availability. The surprise shortage may
have to do with some northern states not meeting production targets, Pawar
said.
The opposition slammed Pawar for setting off panic.
Commodity Online
reports that rift wide open among ministers over price
rise.
Rift
wide open among ministers over price rise
Published
on January
25, 2010 at 16:45
NEW DELHI (Commodity Online): It now seems the Indian Prime Minister,
Dr. Manmohan Singh is not able to crack the whip and sort out the difference
between various ministers which are at logger heads over various issues.
Agriculture Minister, Sharad Pawar is the driver of this rift with opposition
crying foul and asking for his resignation. Though his colleagues in the UPA
coalition are also repeating the same rhetoric, their voices are drowned in
the coalition political understanding.
Essential commodities price rise has become the single most focal
point that could ruin the chances of UPA in future elections. In
fact, the government is already preparing to hand over the power to a
beleaguered BJP on a platter.
Serious issues have cropped up in ministries responsible for essential
commodities. The agriculture minister says he is not a God to predict or
change weather patterns and also complained that other ministries are not
supporting his moves, an allegation leveled by other ministries too.
Inside sources say Anand Sharma (in charge of Commerce), Subodh Kant Sahay
(Food processing) and Environment minister Mr Jairam Ramesh have completely
different view from what Sharad Pawar proposes.
The lack of co-ordination has led to poor control and administrative
lapses. For instance, the government failed to release its food stock at the
right time putting the market to tizzy. Prices of Pawar’s darling
commodities like Sugar reached to unimaginable levels.
A worried Pawar asked for a ban export of milk and milk products to
combat its rising prices but the Cabinet Committee on Prices presided
over by the Prime Minister rejected the plea saying the real issue behind
milk price rise is anything but shortage of the commodity.
Pawar is being isolated for more than one reason. Once the prime
ministerial aspirant, Pawar got his hands full without realizing how his
health and age could allow him to do so much work, a job that his disciple
Suresh Kalmadi also specializes in.
Both Pawar and Kalmadi has got into epic management of those
organizations to which their knowledge and time are limited putting
constraints to their original commitment – to the ministry to which
they have taken vow for and to the people of the area they represent.
The Prime Minister is reportedly unhappy at the Agriculture Ministry but
he cannot do anything other than take a jibe at the minister. If the prices
continues to increase, the coalition theory will collapse sooner or later.
India Raises
Banks' Reserve Requirements
The New York
Times reports that India Raises Banks' Reserve Requirements.
India
Raises Banks' Reserve Requirements
By HEATHER TIMMONS
Published: January 29, 2010
NEW DELHI — Hoping to tamp down inflation without stalling economic
recovery, the Indian central bank acted cautiously on Friday by increasing
banks’ reserve requirements but leaving interest rates unchanged.
The Reserve Bank of India raised the cash reserve ratio, or the percentage of
deposits banks must have on hand as cash, by three-quarters of a percentage
point, to 5.75 percent. That was more than the 0.5 percentage point rise most
analysts had expected.
The change will absorb 360 billion rupees, or about $7.8 billion, from the
Indian financial system, the central bank said. “Even amidst concerns
about rising inflation, we must remember that the recovery is yet to fully
take hold,” the central bank said.
The central bank left the repo rate, a key lending rate, steady at 4.75 per
cent. But most economists expect it to lift rates by the end of April.
“We need to tighten,” the bank’s governor, Duvvuri
Subbarao, said at a news conference, Associated Press reported. “An
increase in policy rates will happen sometime in the future.”
Central bankers in India and other Asian nations face a dilemma: Their
economies are heating up, but there is no guarantee that there will not be a
“double dip” recession in developed countries that could hurt
them, meaning economies in the United States and Europe would contract again.
The issue is “how to make it look like a tightening when the real
objective is to leave liquidity conditions little changed,” said the
UBS economist Philip Wyatt. The Indian central bank’s action Friday
“shouldn’t be a significant restraint on the economy,” he
said.
The Indian economy grew 7.9 percent year on year in the July-to-September
quarter, far better than most other countries. But inflation is rising,
with food prices in particular rising sharply. The inflation rate in December
was 7.3 percent, up from 4.8 percent in November; some analysts say it could
hit 9 percent in coming months.
That is mainly because the costs of essentials like vegetables and grains
have risen after droughts and floods. India, which usually produces nearly
all the food that it needs, may need to import, government officials said
late last year.
The food price index increased 17.4 percent in the week that ended Jan. 16
from the previous week. Grain prices are up about 47 percent from a year ago.
“For several months, rapidly rising food inflation has been a cause for
concern,” the central bank said Friday. “More recently, there
are indications that the sustained increase in food prices is beginning to
spill over into other commodities and services as well.”
The Reserve Bank said prices of manufactured goods had increased in the past
two months, in part because of rising food prices.
My reaction: Soaring
food prices have become a major headache for politicians in India.
1) Food price rise is causing rifts to open among ministers. If prices
continue to increase, the government coalition will collapse sooner or later.
2) Food prices are key to political survival.
Essential commodities price rise has become the single most focal point
that could ruin the chances of UPA in future elections. In fact, the
government is already preparing to hand over the power to a beleaguered BJP
on a platter.
3) There are indications that the sustained increase in food prices is
beginning to spill over into other commodities and services as well
Conclusion: India is not worrying about deflation anymore.
Eric de Carbonnel
Market Skeptics
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