Raise the food subsidy

  • 24/03/2008

  • Business Standard

The Wholesale Price Index numbers for the week ending March 8, released last week, showed that the inflation rate surged almost a percentage point compared to the previous week. It surpassed all expectations (or fears) to touch 5.92 per cent, a benchmark reminiscent of a year ago, when food prices were running rampant. As it happens, the same set of factors that caused so much disruption last year are responsible for the rather discomforting situation now. Food prices are very much at the heart of the problem, with the prices of pulses, in particular, accelerating rapidly in recent weeks. In fact, the prices of staple pulses like arhar and moong have increased by as much as 3 per cent over just one week, gram also by 3 per cent, and masur and urad by 2 per cent, suggesting that the relief provided by a good monsoon last year is coming to an end and prices are likely to be firm until the next harvest comes in, later in the year. The other problem area is oilseeds. Reinforced by surging global prices of the major edible oils, domestic prices have increased sharply. The prices of cottonseed oil, for example, have gone up by an astonishing 10 per cent in one week, while coconut and mustard oil are up 3 per cent. Imported edible oil prices have increased by 4 per cent. In the context of slowing GDP growth, with household incomes about to grow more slowly, these developments do not bode well for the average consumer and, by extension, the ruling coalition in the run-up to the general elections. Internationally, wheat and rice prices too are on the rise, and maize has already reached record levels. If domestic production falls short in the staples, then imports will be an expensive proposition