The inflation is coming down due to decline in global oil prices but why the prices of vegetables, oil and other commodities in India are not decreasing. Economic expert SP Sharma (Chief Economist, PHDCCI) speaks on the issue:
The inflation has come down and that is near zero. This is majorly because of the global sector and significant decline in the commodity prices in the global market and crude oil is one of them. But the prices of essential commodities in India are not coming down because of the supply gaps in the economy.
The supply gap is majorly in the food items and pulses are one of them. The demand for pulses is higher than the supply in the domestic scenario. So, we are forced to import pulses from the foreign markets in order to meet the demand. In foreign markets, the prices of food items are comparatively higher than India. That’s why we are seeing inflation in these essential items.
And in the coming times, the focus of the government will be on agriculture reforms. And the new government is keen on various reforms in the agricultural sector. The focus of the government in the last 2-3 years was also on agriculture sector and it will continue in the coming budget.
The government will focus on the agricultural reforms, majorly the diversification of agricultural markets and infrastructure and our lesser dependency on the monsoon behaviour. Due to bad monsoon last year, the agriculture sector is not seeing growth. So, the government will work on agricultural reforms where the dependency on monsoon is lesser and the irrigation facilities are better.
The focus of the government is on reducing the subsidy factor and they have already abolished the subsidies in the fuel markets including petrol and diesel. But food security is much needed for the economy that’s why the subsidy in the food sector will continue.
The crude oil prices in the international market are around $100 per barrel and petrol prices are around Rs 70 in the domestic market. Now the crude oil prices is around $52 per barrel and the petrol prices are around Rs 57 per litre. So, this is not the defined ratio and there are also so many excise duties. That’s why the prices are declining but not in that extent.