Opinion Food inflation isn’t across-the-board. It calls for a more nuanced approach

Express View: An approach that balances both consumer and producer interests is needed. Currently, the government has chosen a sledgehammer strategy to keep prices low at all costs

Food inflation, Consumer price inflation, CPI inflation, Reserve Bank of India, retail food inflation, INDIAN EXPRESS NEWS

If food inflation isn't across-the-board, it calls for a more nuanced approach from the government that balances both consumer and producer interests.

By: Editorial

October 14, 2023 07:55 AM IST First published on: Oct 14, 2023 at 07:05 AM IST

Consumer price inflation has fallen from 7.4 per cent to 5 per cent year-on-year between July and September, below the Reserve Bank of India’s 6 per cent upper tolerance limit. It has come on the back of retail food inflation registering an even sharper decline, from 11.5 per cent to 6.6 per cent, during this period. Much of the food inflation is at present concentrated in cereals (10.9 per cent) and pulses (16.4 per cent), while the price increases in vegetables and milk — items that were a source of angst until recently — have considerably moderated.

There’s no better indicator of relief on the vegetable prices front than tomatoes, whose annual inflation has collapsed from a mind-boggling 202.1 per cent in July to minus 21.5 per cent in September. Edible oil inflation has been in negative or low single-digits for over a year. Inflation has been high for salt and spices, but sufficiently under control in sugar.

The long and short of it is that food inflation is no longer generalised. While it’s early to say that the worst is over, El Niño’s impact hasn’t been as bad as was feared. There was definitely a lot to worry about when India recorded the driest and also the hottest August this time. Thankfully, rainfall was 13.2 per cent surplus in September.

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Apart from providing life-saving showers for the standing kharif crop, it has pared the overall water level deficit in major reservoirs (relative to the 10-year-average) to 5.6 per cent, from 13.8 per cent on September 6. Reasonably filled-up dam reservoirs and recharged groundwater tables should enable plantings for the coming rabi season, the prospects for which seemed dire till the monsoon staged a timely recovery in September. This should, for now, keep a lid on food prices in general. Food inflation is, if at all, limited to “dal-roti” — unlike when its effects extended even to sabzi and doodh.

If food inflation isn’t across-the-board, it calls for a more nuanced approach from the government that balances both consumer and producer interests. Currently, it has chosen a sledgehammer strategy to keep prices low at all costs — through export bans/restrictions (on wheat, sugar, onion and most rice) and stocking limits (pulses and wheat). Privileging consumers over producers may be politically expedient too, as the former generally outnumber the latter.

But that strategy can backfire where farm votes matter: Soyabean trading below minimum support price, amid all-time-high vegetable oil imports, could well be an issue in next month’s Madhya Pradesh and Rajasthan polls. The government also needs to take a view beyond elections: Are excessively pro-consumer policies conducive for investments in a sector with the highest employment potential, both on- and off-farm.

# consumer price inflation