Understanding Inflation through Graphs

THE FIGURES, GRAPHS TAKEN FROM INDIA TODAY WHICH CONDUCTED EXTENSIVE RESEARCH BASED ON MARKET DATA AND GOVT DATA. 

Also, read my earlier posted article on Agricultural statistics at a glance. It is definitely one of those articles that receive maximum hits on my blog.

Our demand has increased, but productivity is still 2,200 kg/hectare w

hile China uses hybrid rice that allows it to produce 10,500 kg/hectare (ALMOST 5 Times as India's). Look at the price rise over 10 years

Our wheat production has increased but no proper storage mechanisms allow it to rot and the corrupt PDS won't let it reach the poor thereby spiralling prices.

 

  

Pulses required : 18 million tonnes Pulses Produced: 13 million tonnes

India is the LARGEST PRODUCER,  IMPORTER AND CONSUMER of pulses. The middle east and other countries produce < 5 million tonnes. Hence, when we import global prices and local escalate.

We never have increased productivity and is the same output as in 1951.

GOVT Decides the price, sale and if sugar needs to be imported or exported.  India is 2nd largest producer of sugar and when we import, global prices escalate. Best thing to do is decontrol sugar.

 We could have been self-sufficient with edible oil, but due to poor oil seeds and low productivity, we are seeing the crisis.

Shortfall : 11 lakh tonnes to 43 lakh tonnes (from 1996-2008)

Our Consumption increase: 76 lakh tonnes to 120 lakh tonnes (from 1996 - 2008)

Output: 175 million tonnes and is 2nd largest producer in the world.

However, 70,000 Crore worth of produce is wasted because of storage issues and Govt not opening to retail reforms by which foreign companies can start processing the fruits/vegetables and ensure farmers get good price and there is no artificial scarcity. Retail outlets are much better than middlemen in many ways esp w.r.t prices.

When govt manipulates MSP (Minimum Support Price) prices of the essential items increase or decrease. this has to increase so that farmers get a fair share. Some figures:

RICE:

Rs.580/quintal to Rs. 1030/quintal => Price increased from Rs.13 to Rs.23/kg

WHEAT:

Rs.620/quintal to Rs.1100/quintal => Price increased from Rs.8 to Rs.14.5/kg

This subsidy bill  - i.e giving lower price to Below and Above poverty Lines costs the Govt Rs.90,000 Crore every year

Govt should really do contract farming, allowing companies to lease the land, ask farmers to grow and give them a fair price based on rates in the market. Pretty much like Public private participation that has boomed highways sector.

Here's what experts from across the country give their opinions to India today which conducted extensive study

THE BITE VIEW   Board of India Today Economists gives its views on how to bite the bullet on runaway inflation
WHY PRICES ARE RISING?
BIBEK DEBROY SECRETARY-GENERAL, PHDCCI • Industrial production capacity exhausted • Controls on imports of agro products • Real estate, capital, skills in short supply • Lack of agri reforms • Expectations fuel further inflation	AJIT RANADE CHIEF ECONOMIST, AVB GROUP • Zero growth in food production • Money supply up on rise in capital inflows • Inflation is a global problem • Rising input costs • Inflation in services like education, health	INDIRA RAJARAMAN MEMBER, ICRIER BOARD • Low foodgrain productivity • Overheating in some industrial sectors • Accumulated impact of fuel prices • The impact of VAT • Global inflation in inputs such as steel, zinc
SIDDHARTH ROY ECONOMIC ADVISER, TATA GROUP • Excess demand • Supply rigidities, poor output, imports • Income growth is driving food demand • Global inflation in raw material cost • High petro tax robs low crude price benefits	SHANKAR ACHARYA MEMBER, ICRIER BOARD • Accelerated growth and demand pressure • Medium-term weakness in agri growth • Mismanagement of wheat stocks • Global price rise due to growth in China • Expectations fuel rise

HOW TO REIN IN THE RISE?
• Don’t over-react and jack up interest rates • Free up agri trade • Introduce farm sector reforms • Eliminate middlemen in agriculture • Free up real estate sector, privatise PSUs	• Reduce import, excise duties, taxes • Make rupee stronger • Lower money supply • Free up food imports • Open up supply bottlenecks in sectors —from real estate to food products	• Raise farm productivity • Cut non-agri import tariffs • Monitor buoyant capital inflows • Get set for CRR hike • Enable food imports for price control
• Remove supply side constraints • Higher collections should enable tax cuts • Invest in agriculture • Use imports to tackle speculation • Calibrate demand management	• Measured approach to monetary policy. • Import foodgrains, on public account • Avoid adhocism like petrol price cut • Cut customs on final consumer products • Avoid panic reaction