Mehengai hurts rural India the most, public distribution system needs a makeover

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Inflation has moved to “cloud eight” amid falling incomes of people. It jumped eight years ahead and stood at 8.38% in April. This could further eat into the pockets of the masses, who are struggling to cope with the multiple disruptions caused by the COVID-19 pandemic to their household economies. Retail price inflation (RI) which has almost doubled in one year speaks volumes, as it rose from 4.23% in April 2021.

From January, the RI exceeded the 6% cap imposed by the Reserve Bank of India (RBI) for the fourth consecutive month. As inflationary pressure refuses to ease, the Reserve Bank of India (RBI) recently hiked the repo rate – the rate at which India’s central bank lends money to banks – by 40 basis points (bps) at 4.40%. This measure aims to reduce inflation.

Inflation figures revealed that food producers and other rural households face more inflation than residents of small towns, cities and metros. While the urban retail price inflation rate was 7.09%, the rate in rural areas rose to 8.38%. Food inflation was 8.50% in rural areas and 8.09% in urban areas. In April 2021, food inflation in rural areas was only 1.31% while that in urban areas was 3.15%.

Figures released by the Ministry of Statistics and Union Programs Implementation (MoSPI) indicate that food items have an important role to play in driving up retail inflation. The prices of almost all essential items in the food basket have increased. Edible oil prices rose in April by around 18%. The edible oil market has set people’s kitchen economy on fire. The surge in vegetable prices, which rose 16% and 11% for spices, is not relieved. Prices for prepared meals, snacks, sweets and others have increased by 7-10%. Cereals and their products became more expensive by 6%, while milk and dairy products increased by around 6-8%.

Initial deliberations show that there is no sign of inflation easing in the near future due to the global food crises, which are likely to worsen further due to the war between Ukraine and Russia. and other disturbing global developments. The Intergovernmental Panel on Climate Change (IPCC) set up by the World Meteorological Organization and the United Nations Environment Program has predicted that India’s high vulnerability and exposure to climate change climate change will threaten food security and is one of the main root causes of inflation.

This time, the extreme heat wave reduced the yield of wheat and other rabi crops by up to 25%, fueled a food crisis coupled with inflation and also affected farm incomes. Soaring food and fuel prices are strangling the lives of the rural population. In Punjab and Haryana, most rural wheat and rice farming households depend on urban supply to add edible oils, pulses, fruits, vegetables and other essentials to their food basket.

Also read: Russian-Ukrainian war could be a ‘disaster opportunity’ for India’s rural economy

In India, almost 70% of the population resides in rural areas, majority of them are covered by the Food Security Act and get two to three staple foods like wheat and rice under the system Public Distribution Program (TPDS), but they barely get pulses, edible oil and other essentials.

Growing gaps between food supply and demand are sure to worsen if global peace remains precarious and the COVID-19 pandemic continues to lurk. Given our reliance on imports of edible oil and other materials such as petroleum products that have a direct bearing on inflationary sentiments, India needs to exercise extreme caution while taking swift short-term and long-term corrective measures.

PDS must be synchronized with inflation

The Public Distribution System (PDS) has its inherent limitations and drawbacks. It does not meet all the requirements based on the needs of the poor. This is why food security does not protect the rural poor from a spike in inflation. They are the worst victims of rising prices. Edible oils and pulses become out of reach for them because they cannot afford them. Fruits and nutritious products remain out of reach for more than 70% of the rural population, even after 75 years of independence.

The prices of cooking gas cylinders have crossed Rs 1000 per unit. Although during elections policymakers give freebies like three to four cylinders of cooking gas a year, freebies are not a sustainable solution to counter rising inflation. A healthy approach must be adopted. There is no mechanism to monitor the supply chain of essential items or their price from factory to fork or farm to fork. Unfortunately, farmers do not benefit when retail food prices rise.

Given our inability to ensure that every citizen has access to nutritious food, we must get serious about our efforts to deal with inflation. Circumstantial decisions such as banning the export of wheat will not help much because most food products are more expensive today and hit India, a country dominated by groups of poor and low income and a small percentage of us dominating national resources, opportunities and facilities. To begin with, the PDS must be synchronized with inflation and high priced products must be included in the PDS to relieve inflation for the majority of the population.

Also read: Farmers can play an important role in the fight against climate change. Climate-smart agriculture is the only way forward

Go forward

Poor people in India covered by the Food Security Act are also expected to get edible oil, pulses and other essentials for their food baskets from PDS outlets at affordable prices. Kendriya Bhandar outlets are expected to be set up at block level to serve the needs of at least a cluster of 25-35 villages and other small towns under a public-private partnership. This will not only reduce inflationary pressure, but also create employment opportunities for the rural population. Climate-smart crop varieties should be encouraged to maintain sustainable food growth to verify and bridge the gap between demand and supply. A foolproof mechanism should be adopted to monitor either the supply chain of essential items or their price from factory to fork or farm to fork in order to limit inflation.

The author is former Vice Chairman of the Punjab Planning Council and Chairman of the Northern Region Development Council of ASSOCHAM. He is also vice-president of the Sonalika group. The opinions expressed in this article are those of the author and do not represent the position of this publication.

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