Thursday’s news of the WPI (Wholesale Price Index) inflation turning positive may have ended months of chatter on “deflation”, but it raises questions about India’s food situation.
Food articles make up for 15.4% of WPI, and this category itself shows at least 15% increase over the past year. The drought is certainly to blame; an agriculture ministry official said this week that foodgrain production would decrease by 10-15% this fiscal year, since rains have affected the kharif crop.
We can hope that inflation, and its expectations, ease over the next few months with the rabi crop. But that’s only if the government manages the supply well. The recent history of India’s agriculture has been one of export curbs and futures trading bans. Now, current limits imposed on wholesalers for how much food they can stock—sure to generate more anxiety—are only showing ineptness with managing inventories, which is the crux of agriculture.
It’s time the entire regime of supply management—from minimum support prices to storage—is reconsidered.