30 June 2023 : The Hindu Editorial
The Hindu Editorial
30-June-2023
Daily Current Affairs For UPSC ,The Hindu Editorial Summary
1. Spiralling food prices
Topic: GS3 – Indian economy.
Context:
- Indian households are facing a surge in prices of essential kitchen staples, including tomatoes, onions, potatoes, tur dal, and rice.
- The deficit in monsoon rains and the uncertainty of future rainfall patterns pose a risk of further food price increases.
- Policymakers need to prioritize taming inflation to ensure price stability and sustainable inclusive growth.
Reason for recent surge in food prices:
- Supply and Demand Imbalance: The prices of essential kitchen staples, such as tomatoes, onions, potatoes, tur dal, and rice, have been affected by a supply-demand imbalance. Factors like seasonal variations, timing of harvest, and market conditions can impact the availability of these food items, leading to price fluctuations.
- Crop Failure and Weather Conditions: Adverse weather conditions, such as droughts, floods, or unseasonal rains, can negatively impact crop yields. If there is a crop failure or lower production due to weather-related issues, the reduced supply can drive up prices.
- Increase in Production Costs: Rising production costs, including labor, transportation, and fertilizers, can contribute to higher food prices. If the cost of inputs for farmers increases, they may pass on these costs to consumers, resulting in higher prices.
- Government Policies and Interventions: Government policies, such as restrictions on exports, imposition of stock limits, or changes in import duties, can influence food prices. For example, the imposition of stock limits on certain pulses may not have effectively cooled price gains, as mentioned in the provided text.
- Inflationary Pressures: Inflationary pressures in the economy, driven by factors like increased money supply, higher energy prices, or global economic conditions, can impact food prices. Inflation erodes the purchasing power of consumers and can lead to higher prices for essential commodities.
- International Factors: Global factors, including Russia – Ukraine war, changes in international commodity prices, exchange rates, or trade policies, can influence domestic food prices, especially for items that are imported or exported.
Short-term measures that can be taken to address the problem:
- Release of Buffer Stocks: The government can release its buffer stocks of essential food items, such as grains and pulses, into the market to increase supply and stabilize prices. This can help meet the immediate demand and bring down prices.
- Import Relaxation: Temporarily relaxing import restrictions and tariffs on essential food items can help bridge the demand-supply gap. Importing food items can increase availability and put downward pressure on prices in the short term.
- Price Control Measures: Implementing price control mechanisms for essential food items can help prevent excessive price hikes. The government can set maximum retail prices or impose stricter penalties on hoarding and price manipulation.
- Subsidized Food Distribution: Expanding subsidized food distribution programs, such as the Public Distribution System (PDS), can ensure that essential food items reach low-income households at affordable prices. Increasing the quantity and coverage of subsidized food items can alleviate the burden of rising prices.
- Direct Income Support: Providing direct income support to vulnerable households can enable them to cope with the increased cost of food. Cash transfers or targeted subsidies can help mitigate the impact of rising prices on the purchasing power of individuals and families.
- Market Intervention by State Agencies: State agencies can actively participate in agricultural markets to procure food items directly from farmers at remunerative prices. This can ensure fair returns for farmers and stabilize prices for consumers.
Possible steps that can be taken as a long-term solution:
- Increase Agricultural Productivity: Enhancing agricultural productivity through improved farming techniques, better irrigation systems, and access to high-quality seeds can help increase crop yields. This can contribute to a greater supply of food items and potentially lower prices.
- Boost Storage and Distribution Infrastructure: Strengthening storage and distribution infrastructure, such as warehouses, cold storage facilities, and transportation networks, can help reduce post-harvest losses and ensure a smooth flow of agricultural produce from farms to markets. This can improve the availability and quality of food items, helping stabilize prices.
- Promote Diversification of Crops: Encouraging farmers to diversify their crop choices can help reduce the reliance on a few specific food items and improve overall food security. Government initiatives can provide support, including technical guidance, financial incentives, and access to markets for non-traditional crops.
- Effective Price Monitoring and Market Intelligence: Establishing robust systems for price monitoring and market intelligence can help policymakers anticipate and respond to fluctuations in food prices. Real-time data on supply, demand, and price trends can enable timely interventions to stabilize prices and ensure adequate availability.
- Address Supply Chain Bottlenecks: Identifying and addressing bottlenecks in the agricultural supply chain, such as fragmented markets, middlemen exploitation, and inefficient logistics, can help reduce transaction costs and improve market efficiency. Streamlining the supply chain can contribute to lower prices and better returns for farmers.
- Import Management: If there are significant supply shortages or price spikes in specific food items, the government can consider easing import restrictions and facilitating the importation of essential commodities. This can help bridge the demand-supply gap and stabilize prices in the short term.
- Support Vulnerable Households: Implementing targeted welfare programs, such as subsidized food distribution, direct income support, or nutritional assistance, can provide relief to vulnerable households during periods of high food prices. This can help ensure access to essential food items, particularly for low-income families.
- Strengthen Market Competition and Regulation: Ensuring a competitive and transparent marketplace is crucial for fair pricing. Effective regulation and oversight to prevent market manipulation, hoarding, and cartelization can help maintain a level playing field and protect consumers’ interests.
- Strengthening Weather Forecasting and Risk Management: Enhancing weather forecasting capabilities and promoting risk management tools, such as crop insurance, can help farmers mitigate the impact of adverse weather events. Timely information and financial protection can provide stability to agricultural activities and minimize disruptions in food supply.
Model question: Discuss the factors contributing to the recent surge in food prices in India. What measures can be taken by the government to address this issue and mitigate its impact on the economy and households?”
Source: The Hindu, 30 June 2023, page – 8.
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