The sudden rise in food inflation last week, with the rate hitting double digits after many weeks, was caused by an episodic rise in onion prices as well as the sustained rise in the price of protein-rich and high-value foods. The data, however, suggest that perishable high-value foods are contributing more to the high inflation rate than protein foods, which have a relatively longer shelf life. This category of inflation-drivers includes fruit, vegetables, milk, eggs, meat and fish but excludes protein-rich, relatively less perishable items, notably pulses, the main drivers of inflation till last year. This is borne out by the fact that the price of fruit soared during the week ended August 20 by 21.58 per cent and that of eggs, fish and meat by 12.62 per cent even as the price of pulses dipped by 4.16 per cent. The trend was similar to one in the previous week ended August 13 when fruit prices had risen by 27 per cent and those of eggs, fish and meat by 13.37 per cent even as pulses registered negative growth of 5.56 per cent. Pulses have, in fact, remained cheaper this year by 30 per cent from their last year’s peak, even though the price of perishable protein and high-value foods has continued to rise unabated.
Two things are clear. First, the supply of non-cereal high-value foods has failed to keep pace with growth in demand, driven largely by a rise in income and changing food habits. Second, the post-production supply chain for these items is not efficient enough to deliver the available foods to the consumers in a cost-effective manner. Notwithstanding the seasonal factors, such as transportation disruptions during the monsoon, which create short-term shortages and push up prices, the wide gap between the farm gate price received by direct producers and the retail price paid by consumers points to persistent supply-chain deficiencies. Any strategy to ease food inflation should address both problems — production shortage and supply-chain rigidities.
Viewed from this angle, the Planning Commission’s proposal – envisaged in its 12th Plan approach paper – to lay greater emphasis on raising the output of fruit, vegetables and protein-based items than on cereals is well founded. For this, it has mooted different growth targets for different food groups, with the lowest target of around two per cent growth proposed for staple cereals like wheat and rice, relatively higher goal of around four per cent for pulses, and the highest target of 4.5 to above five per cent for horticultural and animal husbandry products. Considering past production trends, the higher targets set for fruit, vegetables and livestock products are both desirable and attainable. This is because labour-intensive activities like horticulture and animal husbandry suit the Indian agricultural condition, which is marked by small farms and large families with ample domestic labour. However, unless the entire chain of post-production activities, including handling, storage, transportation and, most importantly, marketing of high-value agri-products, is suitably revamped to curb wastage, cut delivery costs and eliminate supply-chain rigidities and distortions, higher production alone would not bring down food inflation.
