Twenty years ago, a Maruti
800, with an air-conditioner fitted, cost a little less than Rs.2 lakh. Today it
costs about Rs.2.5 lakh. Twenty years ago, a branded 1.5 tonne window
air-conditioner cost about Rs.30,000; today, you can get a split AC unit for
that price. Then, Videocon was offering large refrigerators for more than
Rs.30,000; you can get better units today for much less. TV prices have crashed
too, and one can go on with this list. In a period when salaries in the
corporate sector have gone up by about 15% annually, and inflation-adjusted per
capita income has roughly trebled, consumer durables of virtually every hue have
become infinitely more affordable.
Why has that not happened
with onions ? In 1980, Indira Gandhi swept back to power on the back of an
election campaign that talked of onions costing the then stratospheric sum of
Rs.5 per kg. Now it is Rs.70. Home-grown apples (not the ones from Down Under)
cost over Rs.100 in Delhi, and lentils of various sorts have also hit
triple-digits. These price increases far outdo income increases, rapid though
they have been for most people, and it is simply not enough to seek palliatives
in short-term measures like raising interest rates. Nor is it enough to say that
there has been demand growth for proteins because of higher incomes. There has
been comparable demand growth for eggs, but they have not seen similar price
inflation. Nor is it good enough to argue that there are global shortages in
commodities — both cyclical (as in sugar) and structural (lentils).
The truth is that we face
inflation in agricultural products, on a scale that we don’t see in manufactured
products, because agriculture has not been reformed, whereas industry has. There
is talk of collusion in onion prices — which raises the question of reforming
trade. Everyone knows that the difference between farmgate and retail prices is
unusually high in India, in part because of multiple intermediaries. But the
country has not been able to benefit from supply chain efficiencies because
organised retail has not been allowed to grow, and to link producer and consumer
prices more closely by squeezing out middlemen. Politicians who for two decades
have opposed reforms in both agriculture and trade will be loath to own up
responsibility for today’s food price inflation; they should know that the
situation will get worse if reforms are not introduced even at this late stage.
The prime minister should do
for agriculture and domestic trade what he did for industry and export trade 20
years ago.
