Photo: twobythree via Flickr
India’s struggle with food inflation may be evident in one crop with surging prices the government is doing its best to control.Onion prices have sent India’s food price index soaring, up 12.13% as at December 11. The 2% jump in onion prices forced a ban on exports of the vegetable until January 15. India’s government also cut import duty on onions.
The government’s moves are working somewhat. State government subsidies for onions, pushed by the Indian national government have seen prices drop in most parts of the country, but in Mumbai prices continue to peak at Rs. 75 ($1.65) per kilogram (2.2lbs).
Why is India’s government so worried? Soaring onion prices brought the downfall of the Bharatiya Janata Party (BJP) in state assembly elections in 1998.
India’s agriculture minister blamed heavy monsoons for prices, but NDTV reported that hoarding and speculation on the part of traders was in large part responsible for price hikes.
To balance its inventory India tapped Pakistan for onion imports, but crop failure across the border coupled with poor visibility have hampered those efforts as well. Rising tomato and garlic prices have also been a cause of worry especially since India banned garlic imports from China two years ago.
Inflation is expected to slow India’s GDP growth next year and the Planning Commission only sees food prices evening out by March 2011.
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