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LATEST NEWS UPDATES | Price pressures in vegetable soup by Saumitra Chaudhuri

Price pressures in vegetable soup by Saumitra Chaudhuri

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published Published on Jan 21, 2011   modified Modified on Jan 21, 2011

The past several months have seen much tumult. From the Commonwealth Games (CWG) to 2G, with garnishing from the Adarsh housing cooperative and the loan fraud, all have provided high octane fodder to Indian politics and the media. However, since the last week of December 2010, another element has intruded into the political/media space, and that is the rising prices of vegetables.

Vegetable prices show a seasonal variation, with prices dropping as the high output winter season sets in towards end-November/early-December. The signs were that the flare-up in inflation that had troubled us for over a year was quietening down a bit and was expected to moderate after October. That it did when the November monthly inflation rate came in lower at 7.5%. However, at this stage things began to go wrong. Instead of the normal seasonal decline, vegetables prices shot up. Whereas between the first week of November and the middle of December last year, the price index for vegetables had fallen by 9%, this year there was an increase of 24%. Not only that, but over the second half of December 2010, vegetable prices experienced a further increase of 21%, instead of the 8% decline in 2009. Thus, between November and December, whereas in 2009 (which, remember, had been a drought year) the prices of vegetables had fallen by 17%, in 2010 it shot up by as much as 50%. The media (and political) focus has been on onions - in part because there was a proximate cause for this in the form of heavy unseasonal rains that had damaged a part of the early kharif crop.

Indeed, wholesale prices of onion rose by 65% through November and December 2010. But it should be underscored that the contribution of onion in pushing up vegetable prices was not as much as some might believe. It was actually overshadowed by the 110% and 125% respective increases in the prices of brinjal and tomatoes during Nov-Dec 2010, almost all of it in the month of December, that pushed the price index of vegetables by even more than did onions. Moreover, there was no weather-related event or other proximate cause that could be associated with the sudden and massive increase in the prices of brinjal and tomatoes and a few other items such as cauliflower - except for the contagion effect emanating from onions. But for such contagion effects to become a sufficient force to lift the prices of brinjal and tomatoes by over 100% in the space of weeks, something strange must characterise their markets. That is, they cannot quite be markets that are free in the commonly understood sense, but must be amenable to cartelisation and that too in a very powerful manner.


The Economic Times, 21 January, 2011, http://economictimes.indiatimes.com/articleshow/7331396.cms


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