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December 23, 2010

India Grappling with Rising Food Prices

by Anjana Pasricha

India is taking a series of measures to reverse soaring food inflation.

Finance Minister Pranab Mukherjee blamed the runaway increase in the price of onions for food inflation jumping to more than 12 percent.

"There has been some upward movement of food items and certain other items in the wholesale price index," he said. "Of course the weekly fluctuations take place and one of the reasons maybe the high prices of onions."      

Onion prices doubled in recent days, leading to a popular outcry and putting the government on the defensive over its failure to ease rising food prices.

The government blamed an unusually heavy spell of rain in the onion-growing region for ruining the crop, while media reports blamed traders for hoarding onions.    

Commerce Minister Anand Sharma immediately announced measures to ease prices.

"A total ban has been imposed on onion exports indefinitely," Sharma states. 

The government also scrapped import duties on onions, and announced it will purchase onions from neighboring Pakistan, where the price is much lower. The steps helped lower prices marginally.      

Onions are the base ingredient of the famous Indian curry and are liberally used in many Indian dishes. They are also a sensitive political issue.  Runaway onion prices have been a key issue in past elections. In a country where millions of low income earners can barely afford meat or milk, onions are considered to be an item within the reach of all.

It is not just onion prices that concern the government. Hopes that an ample harvest this year will check rising food prices have not materialized and overall inflation remains high at around seven and a half per cent.

Fuel prices rose nearly six per cent last week. And there are concerns that rising international prices of crude oil could lead oil companies to increase prices further.   

Soaring inflation is adding to the government's political pressures.  Opposition parties, which held a huge rally in New Delhi this week to protest corruption in the government, said they would also highlight the issue of rising food prices during nationwide protests which they plan to hold in the coming weeks.