The government’s inordinately large food stockpiles have resulted in an artificial market scarcity
On 7 January, the ministry of statistics released India’s advance estimates of national income for 2019-20, pegging the economy’s growth rate this financial year at 5%. Based on data available for the first two quarters, this seems an overestimate. Most indicators suggest that actual growth may be lower than 5%. This is bad news, especially since there is no hope of an economic revival in the near future. What is likely to create further problems is rising inflation.
The consumer price index (CPI) rose 7.35% in December, hitting the highest since 2014 and crossing the threshold limit set by the Reserve Bank of India. Price pressures were high in both rural and urban areas, driven by food prices. Food price inflation surged to 14%, led by vegetables (60%), pulses (15%), meat and fish (9.6%), and eggs (8.8%). A similar picture emerged from the wholesale price index (WPI) data. While overall inflation, at 2.6%, is not very high, inflation in food articles at 13.2% is close to the CPI rate. The culprit again is food inflation, driven by vegetables (70%), cereals (7.7%), pulses (13.1%), and egg, meat and fish (6.2%).
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