The news that wholesale price-based food inflation for the week ended October 22 jumped to over 12 per cent has put everyone into a tizzy — from the highest policymakers to the common man in the street.
Many attribute the rise to a general festival-season surge in the buying spree (the key time is Diwali, this year on October 26), along with some stiffness in supplies mainly of pulses and vegetables. This has also pushed up prices in the retail markets.
But, is the price rise uniform across the country or restricted to some pockets?
While, there is no denying that the price of fruits, vegetables, milk and pulses have gone up in the last one year across the country, data show inflation was more severe in big and metropolitan cities than in tier-11 cities for some commodities.
The reason, experts say, is better purchasing power in big cities. This is leading to more demand, more population and costlier logistics there than in small towns.
Take, for example, tomatoes. The inflation data show that price of this vital farm produce saw a surge in wholesale prices by 88 per cent during the week ended October 22 on the top of a 55 per cent rise in the previous week.
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At the ground level, data shows the increase in retail prices was steeper in Mumbai and Delhi than tier-II cities like Raipur and Patna.
During a year’s span from October last year, the average retail price of tomatoes rose by around Rs 11 per kg in Mumbai, while in Patna the increase was around Rs 5 a kg.
“In big cities, traders try out different prices depending upon customer profile,” notes Arpita Mukherjee, professor at the Indian Council for Research on International Economic Relations, who is an expert in the field of retail and farm marketing. “In small towns, on the other hand, the customers’ ability to pay is less. Also, they are more price-sensitive.” The argument sounds reasonable, given that data show the price rise is more pronounced in the case of cities in the case of commodities like pulses.
In Delhi, in the last one year, the average retail price of arhar dal rose by 7.2 per cent, while it was just 1.6 per cent in Dehradun. In fact, in some commodities, retail prices fell in small cities, while this did not happen in big metros.
It’s not always that farm commodities turn more expensive in big cities than their counterparts in small towns. The reverse too happens (though instances are very few), largely happens because of local factors and supply disruptions at the local level.
Like in the case of lady’s fingers, the average retail price rose by almost 60 per cent in October in Raipur, while the increase was just 3.7 per cent in Delhi.
“In big cities, people have more purchasing power. Hence the demand-supply gap in fruits and vegetables, which is there due to poor marketing, widens,” says Gokul Patnaik, chairman of global agrisystems and former head of the Agricultural and Processed Food Products Export Development Authority.
The high cost of transportation and logistics in bigger cities (compared to small towns) could also be one of the reason for this disproportionate increase in the price of farm commodities at the retail level, he adds.