Indian govt struggles to keep food cheap for poor as prices soar
Monday, 18 February 2008
NEW DELHI, Feb 17 (AFP): Anand's restaurant has served flat bread, lentils and vegetables to loyal customers every day for four decades but for the past year he's been on the receiving end of almost non-stop complaints.
"They argue because we've raised prices. But we had to increase them because everything-wheat, butter and vegetables -- has gone up," says Sanjay Anand, second-generation owner of the restaurant in New Delhi's Connaught Place.
Small restaurants like his, as well as hundreds of millions of people across India have been hit by a huge surge in demand and prices for food worldwide.
The price hikes have triggered government anxiety over whether it can continue to ensure supply of affordable food for the country's 1.1 billion people.
Analysts say India-which produces most of its own food, exports surplus items such as sugar and heavily subsidises supplies for the poor-has so far managed to avoid severe price shocks.
But it is facing the same mix of factors as other nations that are grappling with rising food prices-higher incomes are boosting demand for protein, surging demand for energy is pressuring oil prices, and diversion of agricultural land to urbanisation and industrialisation, as well as grain production for biofuels, is pushing land values sky high.
"Of course India is impacted by global events," said Saumitra Chaudhuri, economic advisor at Indian credit rating agency ICRA.
"The question is whether there'll be a supply response. Better yielding seeds, irrigation, technology and more efficient distribution can and probably will have a major impact.
"But it will take a little time and we're likely to see no slack in demand or costs soon."
The price of wheat on the Chicago Board of Trade more than doubled in the past year to a record high above 10.60 dollars a bushel for March delivery.
That means India's government will have to boost the subsidies it pays to wheat farmers-and those extra costs have to be passed on to customers in restaurants like Anand's.
His price for one roti, or flat bread, has risen 33 per cent to three rupees (one US cent) in the past year.
For the Indian government, subsidies to feed the poor have more than doubled in the past five years to seven billion dollars.
Along with other efforts such as selling transport fuel below market rates to stem inflation, India now spends more than 15 per cent of its budget attempting to control food prices.
"The government would never scrap food and fuel subsidies. It's politically impossible and as we've seen can lead to strikes and protests," Chaudhuri said.
"It's also not sustainable beyond a point and if costs such as wages and other inputs keep going up, other things will fall by the wayside, like roads, power and other infrastructure which just aggravate the problem."
Inflation in India, measured by wholesale prices, is running at around four per cent. Consumer prices, less widely cited, have gained around five per cent.
But for Saba, a housewife from Kashmir having lunch at Anand's, the official figure lags far behind the hikes she has seen in her weekly food budget for staples such as cooking oil and wheat.
"They argue because we've raised prices. But we had to increase them because everything-wheat, butter and vegetables -- has gone up," says Sanjay Anand, second-generation owner of the restaurant in New Delhi's Connaught Place.
Small restaurants like his, as well as hundreds of millions of people across India have been hit by a huge surge in demand and prices for food worldwide.
The price hikes have triggered government anxiety over whether it can continue to ensure supply of affordable food for the country's 1.1 billion people.
Analysts say India-which produces most of its own food, exports surplus items such as sugar and heavily subsidises supplies for the poor-has so far managed to avoid severe price shocks.
But it is facing the same mix of factors as other nations that are grappling with rising food prices-higher incomes are boosting demand for protein, surging demand for energy is pressuring oil prices, and diversion of agricultural land to urbanisation and industrialisation, as well as grain production for biofuels, is pushing land values sky high.
"Of course India is impacted by global events," said Saumitra Chaudhuri, economic advisor at Indian credit rating agency ICRA.
"The question is whether there'll be a supply response. Better yielding seeds, irrigation, technology and more efficient distribution can and probably will have a major impact.
"But it will take a little time and we're likely to see no slack in demand or costs soon."
The price of wheat on the Chicago Board of Trade more than doubled in the past year to a record high above 10.60 dollars a bushel for March delivery.
That means India's government will have to boost the subsidies it pays to wheat farmers-and those extra costs have to be passed on to customers in restaurants like Anand's.
His price for one roti, or flat bread, has risen 33 per cent to three rupees (one US cent) in the past year.
For the Indian government, subsidies to feed the poor have more than doubled in the past five years to seven billion dollars.
Along with other efforts such as selling transport fuel below market rates to stem inflation, India now spends more than 15 per cent of its budget attempting to control food prices.
"The government would never scrap food and fuel subsidies. It's politically impossible and as we've seen can lead to strikes and protests," Chaudhuri said.
"It's also not sustainable beyond a point and if costs such as wages and other inputs keep going up, other things will fall by the wayside, like roads, power and other infrastructure which just aggravate the problem."
Inflation in India, measured by wholesale prices, is running at around four per cent. Consumer prices, less widely cited, have gained around five per cent.
But for Saba, a housewife from Kashmir having lunch at Anand's, the official figure lags far behind the hikes she has seen in her weekly food budget for staples such as cooking oil and wheat.