Ram Avatar Sharma, who runs a roadside bookshop in Connaught Place, is not as worried about the economy as he is about his personal income. It’s just not keeping pace with rising food prices, much less for his son’s out-of-pocket expenses.
Food prices, which rose 9% in August and have stayed above 10% since March, have shrunk Sharma’s household income. Now, he has to pump in more money to buy the same quantity of household goods.
Steady increases in prices of cereals, vegetables and other basic food items might compel the aam aadmi to cut back on protein, meats and other nutritious diets. The poorest are the most vulnerable. “We don’t buy fruits at all,” says Mala Saha, a domestic help in Noida, as she chops away at some okra and potatoes in her one-room tenement.
Food inflation has been the middle-class's Achilles' heel for long. The drive in August prices came from an all-round pick up in wholesale prices. Potato prices rose 68%, wheat went up 12%, lentils 34% and sugar 16%.
All this offset an actual decline in prices of vegetable and fruits. And angry consumers blamed the government for "not caring at all".
Nothing fans inflation more than oil prices. India imports 80% of its crude. A falling rupee, because of higher demand for dollar in the international market, has made oil imports costlier. But this explanation doesn't work for Atma Ram, a grocery store owner. "Diesel prices were raised to benefit big companies," he roars.
Yet, fresh risks to inflation lurk behind trends that will potentially spur inflation, and with it more public anger. A third round of US's 'quantitative easing', or increased cash supply to spur growth, will fan global commodity prices, a chunk of which India imports, such as cooking oil. There's evidence that high gold prices can eventually hit food inflation because investors concentrate on gold, not on food supply chains.
Extreme weather, a drought in four states and flash floods in three, has damaged seasonal horticulture crops. "Suppliers in Uttarakhand told us potato crops have suffered widespread damage from rains. So, back-end prices are high," said Ravi Tanwar, a wholesaler in Azadpur, Delhi biggest market.
For the government, problems are piling up. "There's little to cheer about," Espirito Santo, a financial firm, said in an update.