"Wishing
all readers happiness and gaiety on occasions of MAHAVIR JAYANTI and
EASTER."
Next post will be on Monday, 22 April 2019.
Some food for thought
"We have no firm hold on any knowledge or philosophy that
can lift us out of our difficulties."
—Anne Sullivan (American Educator, 1866-1936)
Word for the day
Conlang (n)
An artificially constructed language used by a group of speakers,
as opposed to one that has naturally evolved such as Esperanto and Klingon.
First thought this morning
Looking for some inspiring story for my story telling session in
a municipal primary school, I came across this story of a brilliant woman, Ms.
Krishna Yadav (see here).
Krishna ji, hails from a small village in Western UP. Daughter
of a small farmer, she never went to school and was married to a man who
dropped out of school in 3rd standard.
More than a decade back, economic stress and fate brought the
family to Delhi NCR in search of job and a dream to give good education to two
children. The couple started with leasing a small piece of farm land in Gurgaon
and growing vegetables. Growing and selling vegetables however did not make
them enough money to make two ends meet. Krishna Ji then decided to do
something more. She attended a very short term course of pickle making run by
Agriculture Department, and started making pickles at home. Her husband would
sell the pickle made by him along with the vegetables he grew on a table put on
roadside.
Krishna ji kept innovating new products while maintaining high
standards of quality and hygiene she had learned during her training. Soon the
business started with a capital of Rs3000, grew manifold. Though illiterate,
she used all techniques of business management. She did backward integration by
putting with her own mustard oil mill and spice processing unit, to manage cost
and high quality.
Today she provides employment to 1500 mostly uneducated women
and makes 200 varities of pickles, jams, juices, etc. Her daughter has
completed BSc and BEd and aspires to be a good teacher.
The best part is that her pickles are amazing and her workshop
& shop happens to be just 500mtrs from my house, and I never knew about
this till I watched this YouTube
video.
Food inflation conundrum
India has received below normal rainfall in each year since
2014. Some estimates suggest that even 2019 southwest monsoon could be below
average. In past year the total food grain production has increased by just 2%
CAGR. A substantial hike was also announced in minimum support prices (MSP) for
various crops last year. Last five years have seen almost 50% jump in total
personal disposable income of India. But all this has failed to impress food
inflation that has mostly trended down in past five years.
I feel, this food inflation conundrum needs a much deeper study
by experts of the subject.
As a common man what I could gather from speaking to other
common man on street is as follows:
There are multiple reasons.
(a) Historically, the
food prices in India have been controlled by hoarding mafia. After Demo the
holding capacity of hoarders has been hit badly. This has resulted in
persistently lower food prices, especially in popular items like pulses,
onions, tomatoes etc.
(b) On the other
hand, there has been significant improvement in supply due to better seed
quality and improved irrigation facilities. However, this higher supply has not
been met with equivalent rise in household demand. The reasons for this poor
demand growth could be as follows:
(i) Decline in
effective wages. Despite higher total disposal personal income, wages have
trended down. This indicates that averages for per capita income and disposable
income have got much more skewed due to rise in income inequality.
(ii) Rise in
discretionary expenses, like telecom, transport, education and health.
(c) The most
important argument is that though the rate of annual food inflation is low, the
absolute prices of many commodities are high and unaffordable for many. We may
need substantial rise in wages to correct this anomaly. Apples at Rs200/kg and
Mangoes @Rs150/kg are unaffordable even for many middle class households,
though their annual inflation rate may be close to zero.
(d) Liberal imports
has led stabilization of pulse, oil seed and onion prices. Cartel led by some
politicians and large business families appear mostly broken.
(e) Better
regulation of commodities' future trading and closure of NSEL has also helped
curbing excessive speculation, in view of some traders.
(f) Globally the crop
productivity improvement may have peaked, but India has still long distance to
go. The visibility of future productivity improvements is very high, and that
may keep food inflation expectations anchored.
On the other side, all major political parties are promising
material rise in farmers' income and social security net for urban poor,
unskilled and unorganized workers etc. This will eventually lead to rise in
demand for food items.
Moreover, the climate change is now reflecting ominously on
weather and crop patterns world over. This may lead to supply disruptions and
higher prices, rather abruptly.
It is therefore important that all policy makers and market
participants take a holistic view of the inflation trajectory and plan
accordingly.
For the time being, I am cutting weight of food inflation in my
investment strategy matrix by 50%.
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