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Paradox of high food prices

Paradox of high food prices
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First Published: Mon, Nov 23 2009. 10 49 PM IST
Updated: Mon, Nov 23 2009. 10 49 PM IST
High food prices have not as yet sparked off angry protests from citizens and political parties, for economic and political reasons. This inertia gives the Manmohan Singh government some breathing space to plan a proper response. It should grab the opportunity.
Food inflation in the first week of November was 14.55%, yet there has barely been a whimper of organized protest in the streets because the Opposition is distracted by internal problems—the Left by its crumbling support base in West Bengal and the Right by internal succession wars. This is a paradox in a country where elections have been won and lost over the price of onions.
Measuring public response to climbing food prices is not an easy task. The Reserve Bank of India (RBI) surveys housewives across the country every three months about their price expectations in the coming months. RBI governor D. Subbarao said, when he announced his new monetary policy on 27 October, that the “survey for households indicates that while inflationary expectations remain contained, a majority of the respondents expect inflation rate to increase over the next three months as also over the next year”.
Why do inflationary expectations continue to be “contained”? One possible reason is that food spending accounts now for a lower slice of household budgets than before, thanks to higher incomes. Food accounted for 53.70% of consumer spending at current prices in 1980-81, when Indira Gandhi came back to power. That average household now spends around 42% on food, and hence is less affected by high food prices than before.
But that can hardly be the entire answer. Lower relative spending on food may be a fact for the growing urban middle class, but there are also millions of poor Indians who are net buyers of high-priced food and for whom current levels of food prices must be hurting. Government programmes such as the rural jobs scheme must be offering some income support, but there is research to show that districts where money has been pumped in for the jobs scheme in fact experience higher inflation because of the extra money with citizens.
That brings us back to the politics: Neither the Left nor the Right has the energy to take advantage of a hot-button issue for most Indian families.
How politically relevant is food inflation? Tell us at views@livemint.com
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First Published: Mon, Nov 23 2009. 10 49 PM IST
More Topics: Ourviews | Inflation | RBI | Indira Gandhi | Views |