Burning food rates turn heat on economy
Economics seem primed to trigger inflationary spiral, they attempt to cope with prices.
By ET Bureau |
NEW DELHI/ MUMBAI: Economic actors such as food product makers, taxi operators and restaurateurs seem primed to trigger an inflationary spiral as they attempt to cope with soaring prices of items such as dal, onions and eggs.
Food price inflation, which is generally attributed to supply-side pressures and not amenable to management through policy action, may be returning to haunt India . By spilling over to the rest of the economy, it could force demands for higher wages from drivers to electricians and has the potential to push up overall inflation, including for industrial products.
On Thursday, official data showed that inflation in food articles climbed to 19.05% for the week ended November 26, its highest level in a decade, from 10.48% a year ago. It last crossed 20% in 1998.
“We are contemplating a 5-10 % price increase,” said AL Quadros, head of a union of 55,000 taxi drivers in the financial capital, Mumbai. “CNG prices may have remained stable, but food prices have gone up so much and it is forcing many drivers to skip meals.”
Taxi fares are fixed by the transport department based on the prices of fuel. Although input prices have been capped with subsidies, the cost of consumption has risen for drivers, like for any other citizen , said Mr Quadros.
Drivers are not alone in their plight. The Association of Hotels and Restaurants has asked its more than 7,000 members in Mumbai to raise prices across the board by as much as 20%, including on masala dosas and pav bhajis.
“If inflationary pressure persists for a long time, it can fuel inflationary expectations and monetary policy will have to take a nuanced view on this,” Reserve Bank of India governor D Subbarao said.
Consumers are feeling the pinch at the retail end as prices of products such as urad dal, sugar and peas are being sold at almost double the rates last year. Surging food prices is a politically-sensitive issue and many governments have been shown the door for their inability to curb the rising costs of articles of daily consumption.
“Price rise of essential commodities continues to be a matter of highest concern to us,” Congress president Sonia Gandhi wrote in party mouthpiece Sandesh
Food price inflation, which is generally attributed to supply-side pressures and not amenable to management through policy action, may be returning to haunt India . By spilling over to the rest of the economy, it could force demands for higher wages from drivers to electricians and has the potential to push up overall inflation, including for industrial products.
On Thursday, official data showed that inflation in food articles climbed to 19.05% for the week ended November 26, its highest level in a decade, from 10.48% a year ago. It last crossed 20% in 1998.
“We are contemplating a 5-10 % price increase,” said AL Quadros, head of a union of 55,000 taxi drivers in the financial capital, Mumbai. “CNG prices may have remained stable, but food prices have gone up so much and it is forcing many drivers to skip meals.”
Taxi fares are fixed by the transport department based on the prices of fuel. Although input prices have been capped with subsidies, the cost of consumption has risen for drivers, like for any other citizen , said Mr Quadros.
Drivers are not alone in their plight. The Association of Hotels and Restaurants has asked its more than 7,000 members in Mumbai to raise prices across the board by as much as 20%, including on masala dosas and pav bhajis.
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“If inflationary pressure persists for a long time, it can fuel inflationary expectations and monetary policy will have to take a nuanced view on this,” Reserve Bank of India governor D Subbarao said.
Consumers are feeling the pinch at the retail end as prices of products such as urad dal, sugar and peas are being sold at almost double the rates last year. Surging food prices is a politically-sensitive issue and many governments have been shown the door for their inability to curb the rising costs of articles of daily consumption.
“Price rise of essential commodities continues to be a matter of highest concern to us,” Congress president Sonia Gandhi wrote in party mouthpiece Sandesh
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