The inflation factor

- January 19, 2020
| By : Mihir Srivastava |

With the economy showing signs of recession while the prices of fruits and vegetable skyrocket, here’s what you need to know PRICES OF food, particularly fruits and vegetables have skyrocketed in the last few months. At the Okhla and Azadpur mandi (wholesale market of fruits and vegetables), prices of main vegetables, especially onion is more […]

With the economy showing signs of recession while the prices of fruits and vegetable skyrocket, here’s what you need to know

PRICES OF food, particularly fruits and vegetables have skyrocketed in the last few months. At the Okhla and Azadpur mandi (wholesale market of fruits and vegetables), prices of main vegetables, especially onion is more than Rs 100 per kg, potato at Rs 30, tomato at Rs 25 per kg. The rates of cauliflower, carrots and capsicum that were in the range of Rs 10-15 per kg are either selling at twice or thrice the earlier prices or have breached the Rs 30-a-kg mark. Mind it, these are the rates of wholesale markets.

In retail markets, rates are varied and mostly twice or even more than the prevailing wholesale prices. In fact, apples that are available inside the Okhla mandi for Rs 50-60 a kg are sold at Rs 80-100 per kg just outside on the street, so that people can buy smaller quantities without having to dismount from their cars. In some places, onion is available at above Rs 150 per kg, like Market One of CR Park in South Delhi.

On the afternoon of January 14, the Okhla mandi bore a deserted look. They did brisk business in the morning and were gearing up for the evening. Inside, along the long corridor lined by vegetable vendors on either side, there are many eateries that sell hot milk from a big concave iron plate, tea, gulab jamun and gajar ka halwa. Also, seekh kebab, biryani, chicken and mutton korma is served on paper plates from big steel containers at cheap prices. Many of the traders and workers were enjoying a meal in the cold afternoon of Delhi winters.

Most of the traders are from western UP, Meerut, Bulandshahr, Aligarh and Khurja, though the number of traders from Bahraich has increased lately. They are mostly, especially the fruit vendors, from the Muslim community. They were very apprehensive to talk to journalists, particularly from channels like Zee News, India Today and India TV. On the assurance that the writer is from print media, they agreed to talk, reluctantly. “The footfall at the mandi has decreased”, confirms Adnam Qureshi, who sells chicken curry in the mandi. The fact that price hike has affected the business has had an adverse effect on his sales. He was seen eating his own chicken curry, given there weren’t any customers.

Sharukh, another young salesman from Aligarh, explains that vegetables that were in the range of Rs 10-15 are now in the range of Rs 30-50. He doesn’t want to discuss prices, gets into a different trajectory of how Muslims are being marginalised, and that price rise of commodities traded by them will eventually force them out of business. He refused to be photographed, calling journalists dalals (agents of the government).

Delhi has this great capacity to provide for all, despite the spiraling inflation. A bunch of women, like Sajba Khatum, had put up their stalls on the muddy ground in one hidden corner of the mandi, selling vegetables that are either partially crushed or stale or leftovers in the truck, just about okay to cook. Her customers are drawn from the poorer section of society. Here bitter gourd is being sold for Rs 10 a kg, which was the prevailing wholesale price just a few months ago. Khatum makes an elaborate plea to buy vegetables from her shop, for it’s a matter of life and death for her. While another woman standing by, adorning dark glasses in the fading light of a winter evening, insisted, “What benefit will come to us if we talk to you? The government doesn’t support us.”

In the evening, the mandi’s retail section became crowded, and people were haggling to get a good bargain. The local office confirmed that about 160 trucks of all sizes supplied vegetable and fruit that day. On the condition of anonymity, he said, “I don’t blame anyone – —neither the government at Centre or state. (Instead) I blame the poor harvest. And due to the cold and fog trucks are stuck and supplies are adversely affected.”


With elections around the corner, the AAP’s Delhi government and BJP’s government at the Centre are passing the buck to each other as to who is responsible for the spiral price rise, a phenomenon that’s not localised in Delhi, but is pan India.

Inflation is often equated with price rise, which is not particularly wrong, as it’s a quantitative measure of the rate at which the average price level of a basket of selected goods and services increases over a period of time, it is often expressed as a percentage. The rise and fall of inflation, therefore, is a measure of fall and rise in the purchasing power of people, or their real income.

A senior official in the Ministry of Finance who deals with statistics, says the situation is bad: while recessionary trends are getting stronger, the inflationary spiral is out of control. He explains in detail various tools available to the government, primarily the central government, and the central bank — or the RBI — in coordination with the Ministry of Finance and how they can take effective measures.

There are various ways of controlling inflation, through monetary means by controlling the money supply or by supply-side policies increasing competitiveness, reducing long term costs. Then there are fiscal measures available, through increased tax rate or by wage control, as inflation indicates more money and fewer goods in the economy.

The retail inflation is measured by the price index, which is determined by the prices of a collection of goods and services important to the economy. The important constituent of retail inflation or the Consumer Price Index (CPI) is ‘Food and Beverages’ which accounts for nearly half of the total weight, and includes cereals, milk, vegetables, meat, fish, oils, to mention a few. ‘Miscellaneous’ accounts for a little more than a quarter of the weight includes transport, communication, health, and education. The other major constituents are housing which account for 10% of the weight, then fuel, clothing & footwear, tobacco and intoxicants.

Retail inflation in India, touching 7.35%, the highest in five-and-a-half-years, is primarily driven by food prices, breaching the RBI’s medium-term target of 4% for the second consecutive month. The situation is grim.

Common perception: Politics behind price rise


Abhinash Borah, faculty Department of Economics, Ashoka University

A PhD in economics from the University of Pennsylvania, Abhinash Borah’s research interests include economic theory, public economics, political economy and welfare economics. He’s a supporter of the Kejriwal government in Delhi and minces no words to say, “Yes, most definitely I want another term for the AAP. The work they have done in areas like health and education is truly remarkable.” And not just in Delhi, but “it seems to have become a template for people thinking about alternative political formations in other parts of the country. I have been in Assam last few weeks and it is remarkable how much AAP comes up in local discussions here when there is talk about a new political formation in the state.”

On the question: Who’s better equipped to deal with inflation, the central government or the government at the state level? Borah says, “When it comes to inflation, economic history teaches us that to achieve the goal of low inflation, effective central bank monetary policy is the key policy instrument.” And for that to happen, Borah says it is of “vital importance” that the central bank is able to credibly signal its intention to keep inflation low. And for this to happen, “the functional autonomy of the central bank to operate independently of government intervention is of vital importance.”

Borah gives the example of Raghuram Rajan who took over as the RBI governor in 2013. The average inflation over the previous 5-6 years was close to 10%. When he left office in mid-2016, this had been brought down to around 5.5%. “What his tenure showed us is that when the central bank is committed to fighting inflation as one of its critical mandates, then results follow. Therefore, the autonomy of the RBI and the monetary policy is of vital importance when we take a long-term perspective on inflation in India, beyond short term factors like higher food prices.”

He adds in his capacity as an ordinary citizen who understands economics, “I hope this hard-earned autonomy from government intervention can be preserved although, to be honest, recent events make it hard for me to remain optimistic on that front.”


Ashima Varma, Senior Manager, Exhibitions India Group

Ashima Varma is an articulate, confident woman who stays in Hauz Khas with her husband, a professional, and two daughters. In her early 40s, she’s from a family of lawyers, is well versed with the politics of the day and identifies herself as middle class.

She blames both the BJP government at the Centre and AAP’s Delhi government for the rise in the price of essential commodities, particularly vegetables and fruits. Varma points out that her monthly budgetary allocations for food items have doubled in the last two years, which impinges on her buying power and is a big dent on her disposal income.

Also, she says that the faulty policies of the Kejriwal government have contributed to the rise in her monthly expenditure. “I’m against the freebies offered by Kejriwal. Somebody is paying for it — it’s the middle class. Why should they pay to reduce the electricity and water bills of the working class?” she makes a spirited presentation of her views.

She substantiates her point by quoting the rise in her electricity and water bills, which have nearly doubled since Kejriwal government doled out freebies like the free bus rides for women, no electricity charges of up to 200 units, free wi-fi, free pilgrimage for senior citizens and waiver of development charges for new water and sewer connections, to name a few.

When she was told that Delhi government has a surplus budget, unlike any other state, despite the freebies and is in the pink of financial health. Varma counters by saying that the “benefits of a surplus budget have not come to the middle class. It has to suffer the most.” Also, she feels that the Kejriwal government has failed to deal with core issues like traffic congestion and pollution.

Varma is not in favour of the confrontational politics of the Delhi government with the BJP government at the Centre. She draws the comparison with Kejriwal’s predecessor, Sheila Dikshit who was chief minister of Delhi for three terms. “There was no conflict when she was the chief minister and she was able to do so much.”

Though, in the upcoming Delhi elections, Congress is not her choice but the BJP. She is for a change in Delhi but qualifies by saying that all political parties are “in the same boat”.


Chandan Tiwari

Chandan Tiwari is a lawyer with MTNL. He walks a lot and visits Okhla mandi on a daily basis as he stays very close in New Friends Colony. A father of a young daughter, he spends a good part of his free time reading books. Currently, he is teaching himself Urdu language. “I’m an idealist,” Tiwari declares.

He is not happy with the way democracy is functioning in India, and advocates for a radical departure from the current polity. Though he wants the scene to change, he asserts that “Given the scenario, given the choices between BJP, Congress and AAP-I choose AAP based on their performance.” Though he’s quick to add, “for this election only” as he’s not an ardent supporter of any political party.

He feels that the polity is driven by perceptions. Social media is the game-changer and has become an important tool to shape mass perceptions. And in this haste to create suitable perceptions that will reap political benefits, the reality of the situation is lost in the rhetoric. He likes to walk the city and is amazed at “Delhi’s capacity to absorb people from all backgrounds, ethnicities and belief systems.”

He feels that social media will facilitate people’s movement, help masses organise so that their voices are heard loud and clear in the corridors of power. He cautions, there’s a flip side of the assent of social media, “The politics of theatrics–who plays better theatrics is the master of politics,” he adds. It’s not about real issues–like inflation–but political rhetoric. And his advice to fellow citizens is: “Enjoy the circus.”