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Food prices continue to hurt

Source : BUSINESS_STANDARD
Last Updated: Thu, Jan 12, 2012 19:40 hrs

Non-vegetarian items, along with fruit and edible oil, have kept household budgets tight.

Mumbai-based shop owner Tina Sachdev is busy defending herself. Her clients ask why when food inflation is supposed to have come down drastically, they see much change in their total budget. "Many fail to understand that while prices of some food items have come down, many others have not gone up," she explains. Many new customers, she says, also feel shop owners have jacked up prices for their own margin.

Madan Sabnavis, chief economist at CARE, says there is respite, as the rate of increase in prices has tempered. However, many are on the same page as Sachdev's clients. Even as food inflation continues to be in negative territory for the second week in a row, consumers shouldn't get their hopes too high, concur economists. In fact, it has gone up four per cent, according to data collected from the ministry of agriculture and the directorate of economics and statistics.
 

SAME PLATE, MORE PRICE
Inflation impact on household budget for a family of four (husband, wife and two children), Mumbai (A very basic food basket has been taken)
Items

Consumption

Jan '11 
(Rs)**
Dec '11
(Rs)**
Change
(%)
Vegetables & fruits**
Onion 5 kg 25 16 -36.00
Potato 15 kg 16 12 -25.00
Brinjal 1 kg 28 24 -14.29
Tomato 5 kg 25 16 -36.00
Apple 3 kg 60 70 16.67
Banana 3 dozen 24 28 16.67
Cereals & grains      
Atta  20 kg 25 24 -4.00
Rice fine 8 kg 27 27 0.00
Rice superfine 2 kg 33 35.5 7.58
Moong split 5 kg 64 62 -3.13
Gram split 1 kg 42 54 28.57
Dairy & meat products
Milk 30 litres 38 38 0.00
Eggs 5 dozen 36 45 25.00
Chicken poultry 3 kg 85 85 0.00
Fish (rohu) 2 kg 200 250 25.00
Edible oils & other essentials
Mustard oil 5 litres 72 84 16.67
Groundnut oil 4 litres 90 110 22.22
Desi ghee 2 kg 380 400 5.26
Sugar 5 kg 31 32 3.23
Bread (local) 5 loaves 16 15 -6.25
Tea (loose) 2 kg 180 200 11.11
Turmeric powdered 
(Agmark)
500 g 18 24 33.33
Red chilli 500 g 73 68 -6.69
Total monthly
household budget
6009.46 6250.02 4.00
** Prices per unit and for fine average quality
Source: Ministry of Agriculture and Directorate of Economics & Statistics

It is possible your budget has increased more than the one in the table. That is because the table has included the most basic food articles and the rates are in line with those in cooperative stores like Apna Bazaar and Sahakari Bhandar and those of the Maharashtra Agriculture Product Market Committee (APMC), a wholesale market. Hence, if you are a regular at branded retailers, or even at your local grocer, you can see a higher jump in your budget. The rates in the table are only indicative.

"A typical food consumption basket does not include only vegetables. There are several other items like packaged foodstuffs. And, if one breaks down the food inflation number into sub-components, the story is for all to see," says Sunil Sinha, head, economic research and senior economist, Crisil. Vegetables, onions, potatoes and tomatoes have contributed most to this negative food inflation number. However, milk, eggs and meat products have stayed firm, even showing double digit inflation in some cases. The negative food inflation number can, therefore, be attributed to seasonal items.

The sharp decline in food inflation is partly because of the base effect and also improved supply of seasonal crops. During the corresponding week of the last year, annual inflation was near 20 per cent.

Data released by the ministry of commerce and industry showed the prices of vegetables were less than half during the week, compared to the prices in the same week last year.

The food consumption basket is typically split into three components: Fruits and vegetables, cereals, pulses and edible oils and, last, dairy and poultry products. Of these, fruits and vegetables, due to their seasonal nature, witness huge fluctuation in prices. So, a bumper crop would mean a sharp fall in prices and vice versa.

The second group is linked to production capacities and is governed by the prices as fixed by the government.

The last group is a major contributor to your household budget. In this case, there are variables like animal feed involved. If these prices go up, the cost of production would go up simultaneously. Once these increase, there is a slim possibility of these coming down, explains Sabnavis.

Interestingly, you could have saved a little more last year if you were a vegetarian. If you exclude eggs, poultry and chicken from your monthly list, you will save another Rs 145.

In the table given, if you include three more vegetables (three kgs each of lady's finger, cauliflower and cabbage) and a fruit (three kgs of oranges), your total budget in January 2011 would have been Rs 6,216.46. This would have gone up to Rs 6,418.02 in December 2011. Increase = Rs 201.56.

If non-vegetarian items are excluded from the budget, the food expense in January 2011 would have been Rs 5,381.46 (saving = Rs 835). And, the expenses would have been Rs 5,438.02 in December last year (saving = Rs 980). Increase = Rs 56.56.

There is no point reading too much into these numbers, though. As Sinha says, this is a temporary phenomenon. One that would pass once the excess supply in the market subsides; then, food inflation would be back into the positive area.




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