India on verge of major cost of living crisis due to unrelenting prices and lopsided govt policies
India needs a comprehensive social protection programme not only to save people in great distress due to deepening cost of living crisis, but also pre-empt consequences such as social unrest
India is entering into a major cost of living crisis due to multiple domestic and international crises, which included soaring food and energy prices, rising poverty, joblessness, endangered food security, disincentives to farmers growing food articles, and lopsided policy interventions.
The way the current government is responding to the issues lacks a holistic approach, and problems are being responded to on an ad hoc basis which further contributes to exacerbation of the cost of living crisis.
For example, the food security report of 2022 has calculated cost of healthy diet in India in 2020 to be 2.970 dollar per day, and said 70.5 per cent, i.e. 973.4 million people were unable to afford it. However, Modi government provisioned for foodgrains for only 800 million people while many other essential needs were unmet.
Even then, due to corruption and other administrative failures, the foodgrains did not reach all targeted people. Millions of people did not have requisite documents which the government should have rectified.
The two years of the pandemic have, of course, made the situation worse and pushed an estimated 230 million people into poverty. Millions more have been added due to the unrelenting price rise.
The government has been in the dark on the real time data about the demography, and now has been caught napping by the revelation that its burden of population has been rising faster than expected. India is to become the largest populated country in the world by 2023, not 2027 as estimated in 2019.
The present cost-of-living crisis has now become a global phenomenon, as the UNDP has said in its report titled ‘Addressing the Cost-of-living Crisis in developing countries: Poverty and vulnerability projections and policy responses’. India thus needs to respond to the crisis primarily on its own.
The economic turmoil and human miseries in our neighbourhood in Sri Lanka should be an eye opener for India, and we must heed to the warning of the UNDP that says, “Sri Lanka’s misery should be a warning to us all on global food, fuel, and finance crisis.”
The UNDP report on cost of living crisis in developing countries have said that the ripple effects of the war in Ukraine have disrupted energy and food markets. Among many other factors, supply chain disruptions and price spikes in key commodities have been pushing the world towards a precarious inflationary surge.
This will have an immediate and devastating effects on household welfare — with those in poverty and near-poverty typically hit hardest due to their higher energy and food budget share — posing significant policy challenges to governments during the response.
The soaring food and energy prices could push up to 71 million people into poverty, and the world has only two options – first, blanket energy subsidy, and the second, targeted cash transfers to the vulnerable.
Price rise has led to a global inflationary surge not seen in years. The IMF has projected an inflation rate of 6 per cent for developed countries, and 9 per cent in developing counties in 2022.
As for India, its headline retail inflation rate, as measured by CPI, was stayed largely unchanged at a high of 7.01 per cent in June as against 7.04 per cent in May.
A joint report by UN FAO, UNICEF, IFAD, WFP, and WHO titled ‘State of Food Security and Nutrition in the World 2022’ presents an alarming picture for India. The prevalence of undernourishment in the total population in India during 2019-21 was 16.3 per cent while wasting in children under 5 years of age in 2020 was 17.3 per cent, stunting in the same age group 30.9 per cent. Anemia in women aged between 15-49 was 53 per cent in 2019.
Real time data is not available, and we don’t know how much deterioration might have been caused by COVID-19 crisis. We only know by the government’s claim that it had made provisions of free foodgrains for 80 crore people out of about 138 crore population. Thus, the level of malnutrition and related wasting, stunting, anemia etc might have been exacerbated to an unprecedented level.
The food security report mentions India as the most prominent example of LMIC countries where the food and agriculture policy has historically focused on protecting consumers by ensuring affordable food prices through export restrictions and through marketing regulations around pricing and public procurement, public food stockholding and distribution of a vast range of agricultural commodities.
Due to this, farmers have constantly faced price disincentives in aggregate terms, i.e. negative NRPs. Input subsidies and expenditure on general services such as in R&D and infrastructure have been widely used as a means of compensating them for the price disincentives generated by trade and market measures, and for boosting production and self-sufficiency in the country.
India thus needs a holistic approach in balancing affordable prices for people as consumers and doing away with price disincentives to farmers to ensure sufficient food articles production and smooth supply to the consumers.
The self-sufficiency in foodgrains at the national level must be broadened to all other crops also, such as pulses and oilseeds. Greater support must be provided to farmers in terms of input cost, improved scientific agriculture, and infrastructural improvement in irrigation and agriculture market. However, it would not help much if we fail to ensure food security at household level.
A holistic approach and comprehensive multi-sectoral plan is needed in the long term to deal effectively with the cost of living crisis. However, in the meantime, support to vulnerable groups of people is highly desirable. Direct fiscal support is considered more effective than subsidized selected food items only which cannot ensure required healthy food and other items, such as essential drugs and medical or educational expenses etc.
India immediately needs a comprehensive social protection programme not only to save people in great distress due to deepening cost of living crisis, but also to pre-empt consequences such as social unrest.
Views are personal
Published: 13 Jul 2022, 9:00 PM