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Role of Sensex with respect to Food Inflation, Discuss


When we contemplate on the existing economy we can understand the fact that both prolonging deflation and inflation in share market have adverse, unsynchronized effect on food inflation. A typical deduction can be done when we introspect into the problem. Deflation of cost of pesticides inhibits farmers to overuse it for better yield and faster rate, but they failed to understand that they had become prey to corporates and jeopardized the quality of their farmland. "Diamond can be chiseled only with other diamond," similarly, we can use the tool namely inflation to constrain the farmers from overuse of pesticides. "Inflation creates bubbles and burst. That develops world economy and will destroy it too- Toba Beta." Scrutinizing food inflation is imperative for maintaining healthy Indian economy.

Two of our country's core markets are BSE and NSE where the Sensex and NIFTY are used as the respective scales. On elucidating the mechanisms behind the functioning of share markets two possibilities are inflation and deflation of shares. In India three pivotal reasons that can be ascertained pertaining to inflation are cost push inflation, demand pull inflation and unemployment. Firstly according to Philips curve unemployment is inversely proportional to inflation, the physical significance is when the farmers are reduced in numbers, the production plunges in both terms of quality and quantity. Secondly private retailers trickily store the food products until the demand for the product increases and the food inflation occurs. Finally as the living standard of the people is getting sophisticated and as they earn high salaries, the corporate increase the MRP rates on the competitive basis. Deflation occurs with the exactly opposite mechanism of cost pull and demand push mechanism. Inefficiency of the fiscal policies and lakh of punishment to the retailers who doesn't escalate the products to the market at the specified duration and illegally store it, this can be quoted to be the key reason behind it.

Food inflation is said to create huge impact on the society next to Pharma inflation. It expands the gap between high income and low income groups. While the high income society is going to enjoy sophisticated life, affording for two meals per day will also be an irksome task for low income societies. The government will fail to provide economic justice to the people as declared in the preamble. The issue reflects the inefficiency of PDS (Public distribution system). Significant percentage of food products gets contaminated in the storage due to unsterilized environment and action of mice. Transport facilities are inadequate in India while Tanjore (Tamil Nadu) is the "rice bowl of India" and Andhra Pradesh is the "egg bowl of India" Madhya Pradesh is the "soya region," people from every state will get access to all the crops if and only better interconnectivity and infrastructure of roadways is established. Often the crops get affected due to bad weathers, government recklessness towards providing rational subsidies in the time of grievances instead they spend governments fiscal especially during the election times in the name of MSP (Minimum support price) this is evident from the fact that the farmers suicide is seeing a steady increase on yearly basis, instead government should introduce schemes which benefits the farmers by legitimately using governments fiscal.

On correlating the share market with food inflation, the inflation in the shares of fuels and machineries would force the farmer to invest huge sum and starts demanding high prices. Import of foodproducts on which officials are least concerned about is the root cause of food inflation, the slow advancement in technology paved way for the import of machines and appliances from developed European countries .The importing countries will fix high rates which results in deflation in stocks of Indian market but the food prices increases manifold. Employees of industries often get involved in strikes for lame reasons of which manufacturing sector results in huge loss and inflation in both food products and machineries. "Inflation is taxation without legislation-Milton Friedman", but we fail to read the causes of it.

Despite of ranking fifth in the food processing sector across the globe in exports, production and consumption and spending INR 500 Million for development of indigenous cattle breeds, we still face the biggest epidemic high food inflation. Hitherto no special strategies are taken by officials to scrutinize the problems of food inflation with respect to share market. A monopolist system should be appointed by the government to curb at the inflow of food products into our market. Strict bars need to be set up for food export which on one hand increases the economic strength of the country but when done surplus results in the scarcity for food in our own country. Installing of solar panels will provide optimal solution to farmers to meet the huge sum spent on electricity. Some Pragmatic Solutions are suggested below to check the inflation under control:

  • Development of cold chain facilities for storing pulses
  • Cutting up of repo rates and Cash reserve ratio
  • Parallel pricing
  • Business process outsourcing (BPO)
  • Strict laws for penalizing persons involving in Black markets
  • Developing transport facilities
  • Hydroponic fodder for feeding cattle's
  • Expansion or easy money policy
  • Cage culture for breeding earthworms
  • Terrace farming
  • Conducting awareness campaigns on ill effects of inorganic farming

S. HarshaVarthan