Inflation Current Affairs - 2020
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India is witnessing price hikes in retail onion up to Rs 100 per kg currently in November 2019. Government had introduced the TOP-Tomato Onion Potato Scheme in 2018-19 Budget to address this problem. However, the scheme has not taken off well.
The FICCI (Federation of Indian Chambers of Commerce and Industry) on Novmber 8, 2019, submitted a report to the GoI analyzing the problem. The Federation has also provided solutions to the current problems being faced in the country due to price rise of Onions.
Highlights of the study
- Around 40% of total onions produced were damaged this year (2018-19) in the periods of heavy rainfall due to lack of post-harvest storage facilities
- FICCI suggests long term solution studying Brazil and Israel models. It recommends low cost technologies for storing Onions
- Israel stores onions in open ventilated warehouses. The warehouses are ventilated through continuous forced air.
- Brazil stores onions in low-cost well ventilated silos systems. They are built at farm levels. Brazil also uses refrigerated rooms to store the vegetables.
- The report says that for the first time GoI is incurring a buffer stock loss of 57,000 tons. This is 25% of the total buffer stock
India’s current measures
- In India very few startups use farm level refrigeration for perishables
- GoI through “Mission for Integrated Development of Horticulture” promoted low cost thatched bamboo storage. According to the study, India lacks in storage systems that sustain monsoon.
- In India Onion is cultivated throughout the year in several places. Onion scarcity occurs only during July to September. In order to maintain regular supply during the lean period GoI stores onions in ventilated warehouses. The losses are high in these systems. Around 20% to 40% of onions are lost
Tags: Agriculture • Brazil • Climate-Resilient Agriculture • FICCI • Food Inflation
India Ratings and Research (Ind-Ra), a part of Fitch group has lowered India’s gross domestic product (GDP) forecast for financial year (FY) 2019-20 to 6.1%. This was second downgrade in the last two months. Earlier in August 2019, Ind-Ra had revised GDP growth estimate to 6.7% from its earlier forecast of 7.3%. It has cited slowdown in both rural and urban consumption demand growth as one of the key reasons for the downward revision of GDP in its August 2019 forecast.
Growth Forecast: GDP growth in the first half of FY 2019-20 to be 5.2% and forecasts it to recover to 6.9% in 2HFY20, mainly on account of the base effect.
Government Measures: The recent measures announced by government to arrest economic slowdown are likely to support growth only in medium-to-long term. Most of the measures announced by government are essentially supply-side response to revive growth.
Bigger challenges faced by economy: It is from demand side as consumption demand has collapsed and private corporate investment is not forthcoming.
Way Forward: There is need is to take measures that will enhance disposable income and put additional money in the hands of rural and urban households. Government-initiated spend on rural infrastructure activities will help to generate large-scale employment that could add/stimulate consumption demand.
Key drivers of inflation in India: They are food and crude oil prices and they stand favourable/benign currently. They are likely to remain the same during the remainder of the financial year.
Fiscal deficit: It has been budgeted at 3.3% of GDP. It could increase to 3.6% of GDP in FY20. Additionally, current account deficit is expected to decline to 1.8% of GDP in FY20 from 2.1% of GDP in FY19, aided by softer crude oil prices. In terms of the domestic currency, Indian rupee will average 70.86 against the dollar in FY20.
Tags: Economic Slowdown • Economy • Fiscal Deficit • GDP forecast • Ind-Ra