Jayantilal Bhandari
The consumption of edible oil in India is two hundred and twenty five million tonnes per annum and this includes eight million tonnes of palm oil. Palm oil is used in the production of everyday items from food to soap, biscuits, toothpaste, shampoo. In such a situation, due to the deepening crisis of palm oil, other items besides edible oils are also becoming expensive.
In the Raisina Dialogue held in Delhi last week, External Affairs Minister S. Jaishankar said that due to Russia-Ukraine war and supply chain disruptions, there is a shortage of food grains in the world and inflation is increasing rapidly. From the government to the economists, they are worried about this situation. The common man in India is also struggling with the increase in prices, but due to the compatibility of food grains, the situation has not arisen here, as are being seen in other countries of the world. At present, India is also in a position to help the world get out of the food crisis due to its food grains.
It is worth noting that in most countries including America, Britain, Turkey, Pakistan, where inflation is much higher than India, there are also reports of out of stock of edible oils and flour in many European countries including Germany, Italy, Spain. In view of the epidemic crisis and the possibility of further increase in inflation, people are hoarding goods in their homes. Due to this, many European countries have been forced to implement the rule of selling goods in limited quantity, so that hoarding does not increase. Not only this, due to the decline in industry and business in many European countries, the process of layoffs of employees is also going on. Anyway, unemployment has become a big and serious problem of the world.
It is noteworthy that in spite of the compatibility of food grains in India, there are four scenarios of rising inflation. One, wholesale and retail inflation is rising. Two, the rise in the prices of petrol and diesel is affecting everyday spending. Three, imported goods from many countries, including China, have become expensive and Indonesia has decided to stop the export of palm oil. Fourth, inflation is increasing due to the increase in interest rates, making loans costlier.
Significantly, according to the data released on April 18, the wholesale inflation rate increased to 14.55 percent in March. This was the highest in the last four months. This was the twelfth consecutive month that wholesale inflation remained above 10 per cent. Similarly, retail inflation also reached 6.95 percent in March this year, which was the highest in the last seventeen months. This is the third consecutive month that retail inflation has remained outside the Reserve Bank of India’s (RBI) range of 2-6 per cent.
It is also important to note that due to the war between Russia-Ukraine, rising crude oil prices and disruption in the supply of commodities, the global commodity market has also remained sharply bullish. Due to the re-spreading of corona in many industrial cities of China, including Shanghai, steps like complete ban are being taken. Due to this reduction in production, raw material imported from China has become very expensive.
This is affecting the industries of India. Sunflower oil imports are already affected due to the Russo-Ukraine war. Indonesia has stopped exporting palm oil since last week. The consumption of edible oil in India is two hundred and twenty five million tonnes per annum and this includes eight million tonnes of palm oil. In India, palm oil is used in the production of items ranging from food to everyday use like soap, biscuits, toothpaste, shampoo. In such a situation, due to the deepening crisis of palm oil, other items besides edible oils are also becoming expensive. This will have an impact on April’s retail inflation rate.
Along with the government, the Reserve Bank is also not unaware of the ill effects of rising inflation. At present, the priority of the Reserve Bank is to control inflation. Keeping this in mind, at the behest of the Reserve Bank, various commercial banks of the country have increased the lending rate (MCLR). This has made loans expensive. Borrowers, businessmen and industrialists will have to pay more installment and interest on the loan. Due to the increase in the loan rate, the difficulties of the people will increase further in the era of inflation. MCLR is the standard interest rate of banks at which banks lend to customers.
Although the cost of debt is an effective step towards controlling inflation, but it is likely to have an adverse effect on economic activity. In fact, the common man, entrepreneurs and businessmen will back away from taking loans at expensive rates. This will reduce the demand and supply of various products in the market. The situation is also that after the increased inflation since March this year, where inflation has affected the life of the common man, its effect is also visible on the payment of loans. The number of people who cannot repay the loan is increasing. Whereas in November last year, the repayment capacity of borrowers showed improvement in view of the boom in economic activity. But in March, the economic situation started deteriorating again due to rising prices of food items and oil.
At present, the effect of inflation in India is less as compared to other countries. In India, some favorable conditions are clearly visible in keeping inflation from rising sharply. Good agricultural production is playing an important role in controlling the prices of food items in the country. Apart from this, not only does the country have a surplus reserve central stock of rice and wheat for the Public Distribution System (PDS), but the country is also exporting wheat and rice. It is also important to note that the utility of the Public Distribution System in controlling inflation in the country is visible.
Under the National Food Security Act, out of about eighty crore beneficiaries under the public ration system, by January 2022, more than seventy seven crore beneficiaries were digitally connected to all ration shops. The government has extended the period of storage seal on oilseeds and edible oils by six months till December 31, 2022. Under the storage limit, the retailer can store up to three tonnes and the wholesaler up to fifty tonnes of edible oil. With this step hoarding will be controlled.
The Reserve Bank has also said that it will now give more priority to inflation control than increase in growth rate and will gradually withdraw its soft stance. Just as the central government had reduced customs and excise duty on petrol and diesel and many states reduced VAT when the prices of petrol and diesel exceeded one hundred rupees per liter in 2021, similar steps are now visible again. Huh.
It is to be expected that the government will move swiftly to protect the common man and economy of the country from the dangers of inflation through various such strategic efforts. The Indian Meteorological Department has predicted a normal monsoon this year, it will be accurate and inflation will be controlled by a normal monsoon.