Rising Prices

In India, certain commodities have been classified as essential commodities as per the Essential Commodities Act 1955. These commodities include but aren’t limited to oil cakes, cattle fodder, components of automobiles, coal, certain drugs, woollen and cotton textiles, edible oils, steel and iron, products manufactured from steel and iron, petroleum and its products, paper, food crops and raw cotton. These commodities are essential to both the population of the country and to its economy. Therefore, any shortfall can result in high prices quickly.

Over the past few years, these essential commodities have seen price rises ranging from 72 percent to 158 percent. The hikes in price are caused by both the demand and the supply of these commodities.

India’s increasing population is one of the main factors in price hikes. The demand exceeds the supply by a huge margin and the demand keeps growing as the population increases. In addition, changing habits have increased the demand for certain commodities well beyond what can be supplied.

From a supply perspective, factors such as uncertain weather, lack of cold storage and lack of warehousing facilities play a huge role in pushing prices up. A very high percentage of vegetables and fruits are wasted because of inadequate cold storage facilities, affecting supply and raising prices.

Commodities such as petroleum, which are imported to a large extent, are subject to international prices. Therefore, the moment there is global shortage or global price hike, these commodities become dearer.

Artificial gaps in supply are created by unscrupulous operators such as black marketers, hoarders, and traditional traders. By holding back these commodities, they are able to create a bigger demand and thus, an increase in prices.

Since these commodities are essential, price hikes have both economic and political consequences. The price rises become part of the political agenda for opposition parties to attack the government. By doing this, they attempt to show solidarity with the common man. However, there is no doubt in the fact that it is the common man who is the one most deeply affected at the end of the day. Sweeping reforms are needed to control hoarders and reform agriculture in a way that price hikes for essential commodities don’t hit the common man where it hurts most – his wallet