RETAIL AND WHOLESALE PRICES DOWN...REALLY?

By Research Desk
about 9 years ago

By Ruma Dubey

Sometimes, we get so carried away by the work surrounding us that we stop paying attention to what is happening on the ground. Take a visit to buy the monthly food grains and vegetables, you will know aate-dal-ka-bhav, literally!

For someone who is earning around Rs.5000 -7000 per month, life has become a huge struggle. Its all about making ends meet and taking care of the basic necessities of life. Saving for the future? What is that?

That’s why when we see that Wholesale Price Index (WPI) has for the tenth consecutive month has come in the negative at 4.95% while Retail or Consumer Price Index (CPI) continues to decline to 3.66% in August v/s 3.69% in July, it seems like these numbers are of Mars while we live on Earth!

Toor dal, in the wholesale market today costs around Rs.148 per kg and depending on the area you live in, the retail price ranges from Rs.150 upwards. All the other dals are in the average rate of Rs.120-130/kg. Milk costs Rs.48 per litre. And vegetables are becoming a luxury. The ubiquitous onion and potatoes have become out of reach, costing anywhere between Rs.50-70/kg. Tomato is Rs.30/kg. Let us not even get into the costs of fruits but be assured, banana is unaffordable to the poor man too! Even the poor man’s food – the cutting chai costs Rs.5 and vada pav is Rs.8!

So if the common man on the street, for whom the Govt machinery says it works for, was spending Rs.2500 per month on food six months ago, today his outgo on the same food or probably lesser, has more than doubled. Most are today living on just the basics – rice, milk, sugar, oil, wheat and dal. And yes, there are the ‘ration shops’ which provide food grains at subsidised rates but the quality is so bad, most say it is not edible at all. Thankfully, in India education and medicines are subsidised or else, we would have a nation of hungry, illiterate and sick children.

While this is how inflation has affected most of the people but for many, it remains a figure which comes out every mid-month. And it is based on these figures that RBI decides whether to hike or lower interest rates. Talks have already begun of how these two low rates make it a sure-shot case for the RBI to lower rates. But what about the deficit of rains and the fact that we are importing even tur dal today?

And then on the other hand, we have the stock market which celebrates every time there is a price rise of commodities, or news of crop shortages. Research houses and FIIs who are akin to predators, recommend buying into commodity stocks, especially those in food grains as soaring prices would improve the earnings. The debate, whether to focus on growth or on controlling costs is never ending. The stock market is essentially capitalist where every adversity is an opportunity and surely, it would want the RBI to puruse only growth. 

The struggling-to-survive man on the street, the woman haggling with the vendors to save a few pennies more and the elderly having to do away with healthy fruits simply because they are unaffordable, all point in one direction – prices need to come down or else this inflation will itself become the monster and eat away all the growth, whatever little achieved.