Column

If the latest data put out by the official machinery are to be given credence, the inflation rate has plummeted to a mere 4.05% on a year-on-year basis for the week ending August 4, 2007.

But, ask the man in the street and he will tell you a different tale - that his visits to the neighbourhood market suggest that the cost of daily necessities has become dearer.

Consider the figures that went largely unreported.Though the overall inflation rate was barely above the 4% mark in early August, official statistics reveal that the price index for the food articles group had risen by 8.36% over a twelve-month period.

Within this group, cereal prices have hardened by 8.72% and fruits and vegetables by 10.42%.The spurt in pulses is a modest 3.33% because large-scale imports have beefed up their availability.

The rise in edible oil prices has been the sharpest at 13.46%, implying that, despite liberal imports, the supply-demand equation is skewed.

Of course, sugar and gur have charted a downward course, with their prices plunging by nearly 18% and 13%, respectively.

Here, two factors are at work. One is the record harvest of sugarcane - from 281 million tonnes in 2005-06 to 345 million tonnes in the following year.Responding to this, gur has ruled easy in recent months.

In the case of sugar, an added reason is that, apart from supply of levy sugar to the masses at below the cost of production, the Centre has been influencing the price of this commodity by its control over releases of sugar in the open market.

Thus, soaring food prices are a reality but this is not reflected fully in the wholesale price index- measured index. This is because of low weights accorded to food items in this index.

The food articles group has a weightage of about 15%; if to this, the 11.5% weight assigned to a subgroup —- food products in ‘manufactures’—- is reckoned with, just 26% of the weight is allotted to the food group in this index.

That’s too low to impact on the final inflation figure.Though overlooked, the food inflation contained in the wholesale index is substantial and should engender concern.

For, in the ordering of human wants, food occupies the first place and when the prices of these wage goods keep on soaring, its effect on the masses is deleterious.

It also presages a bigger increase at the retail level in the weeks ahead. Already, as of June 2007, the food group in the four consumer price indices has been on an upward march —9.2% for the index for industrial workers, 7.7% for urban non-manual employees, 8.8% for agricultural labourers and 8.7% for rural labourers.

The question that is germane in this context is: is surging food inflation endemic in the Indian context? The answer, regrettably, is in the affirmative.

Consider the issue in a broader perspective. In the case of rice and wheat - the crops that spearheaded the green revolution - the yield potential seems to be exhausted; for coarse grains, pulses and oilseeds, though several schemes are being implemented, the results are not promising and no production breakthrough is in sight.

This situation is made worse by skewed pattern of fertiliser consumption, poor seed replacement rate and low level of investments in the farm sector.

The consequence of this indifferent performance is evident in the slower growth rate of agricultural production vis-à-vis population growth. Thus, in per capita terms, the foodgrains output during 2006-07, at an estimated 189.9 kgs, is less than what it was in 1999-00 -206.7 kgs, even though in 2006-07, the overall production was the highest ever at216.1 million tonnes.

The position is much worse in respect of coarse grains, pulses and oilseeds.In this scenario, persistent and serious supply-side jerks are built-in and importsseem inevitable for the foreseeable future.

And, since our needs are large, when we enter overseas markets for purchases, prices abroad tend to go up. So, inflation in food items seems inescapable both on account of domestic harvest setbacks and on account of costlier imports.

Are higher food prices, then, preordained in the existing scheme of things? Yes, till we are able to infuse momentum to the sagging growth rate in agricultural production. Though several plans are chalked out and underway to this end, the one that is not accorded due emphasis is the propagation and use of quality seeds.

Farmers rely on farm-saved seeds to the extent of 85%. These seeds are of poor quality and their repeated use adversely hits productivity.

If a high seed replacement is brought about by education of farmers, this, singly or in conjunction with other programmes, can make a quantitative and qualitative difference to our agricultural production.

Success here is the best insurance against escalating food prices. This can be achieved over a relatively short period, if the official machinery is geared to the task at hand.

Till then, food inflation will be a reality we have to contend with.