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A Moneycontrol article quoted Brookings India Director of Research and former RBI deputy governor Subir Gokarn on the recent surge in the prices of pulses.
While rising food inflation driven by pulses has been a never-ending discussion topic in India’s macroeconomic policy-making, this time around all hell has broken loose with tur dal prices rising to more than Rs 210
Soaring tur and moong dal prices have set pulses racing of the political class and the aam aadmi alike, albeit for different reasons. Food inflation has been making headlines for a while now, but this time around all hell seems to have broken loose with tur dal prices rising to more than Rs 210.
Government’s counter measures
To combat rising prices, the government is planning to hike minimum support price (MSP) for lentil, chickpea, moong and urad dal, reports CNBC-TV18. It is likely to be raised to around Rs 300 per quintal to encourage pulses farming. This follows a long list of measures that the government has already taken to tame prices — curbs on stocking, importing 7000 tonnes of tur dal, reducing import duty to zero, export ban, use of Essential Commodities Act, raids on hoarders, among others — with little or no impact.
This follows a long list of measures that the government has already taken to tame prices — curbs on stocking, importing 7000 tonnes of tur dal, reducing import duty to zero, export ban, use of Essential Commodities Act, raids on hoarders, among others — with little or no impact.
Read the full article in Moneycontrol here.
Need for stock limit review?
The harvesting season typically for pulses is between one and three months, with consumption spread through the year. In such a scenario, storage becomes a necessity to ensure smooth supply throughout the year. But the moment the government imposes stocking limits, legitimate stockists become hoarders, Gulati and Saini point out. And while in the short-term, seizing these stocks from ‘hoarders’ may bring down prices, the government appears to be completely ignoring what will happen to supply in the coming months.
Age old demand-supply issues
All this is but a result of demand-supply mismatch at the end of the day. Despite tur being a part of the rich man’s diet (not consumed by the lower income group), or as economics textbooks refer to it as a ‘superior’ good, the country is facing such a shortage. It is hence obvious that as incomes increase, the demand for such goods increase more than proportionately.
In a column in Business Standard, Subir Gokarn , director of research, Brookings India, and former deputy governor of the Reserve Bank of India, says a long-term supply enhancement solution is imperative. While small quantities of imports are feasible and will provide some relief, the fact is tur is not widely cultivated globally.
“It would be wise to enter into long-term supply contracts with land-abundant countries such as Australia, some African countries and so on. India has to start thinking globally about food security, just as it has been doing about energy.”