Why in the News?

The price fluctuations and Inflation trends in recent market underscore the necessity for Targeted Policy Interventions and a comprehensive grasp of Agricultural Supply Chains.

The Significance of Vegetable Triumvirate (trio):

• Tomato, Onion, and Potato (TOP) aren’t just statistical entities but essential ingredients in Indian cuisine, forming the backbone of many dishes.
• These vegetables represent more than just a portion of the CPI basket; they embody cultural and dietary preferences deeply ingrained in Indian culinary traditions.

Volatility and its role in shaping Inflation trends by TOP vegetables:

Vegetable prices in India rose by approximately 15% year-on-year, indicating significant inflation in this category.

• Highly Volatile: There was notable volatility in vegetable prices, with a sharp decrease of 0.7% in June followed by a substantial increase of 37.4% in July.
• High Contribution to Inflation: Despite vegetables weighing only 6% in the total CPI basket, their contribution to inflation was about 30% in Feb/March 2024.
  • For example, Tomatoes having a weight of only 0.6% in the CPI basket, prices soared by 202% in July 2023, contributing to 18.1% of the total headline inflation.
  • The contribution of vegetables to headline inflation was 31.9%, with TOP (tomato, onion, and potato) contributing 17.2%, further highlighting their substantial impact on inflation trends.

Navigating Culinary and Economic Realities (Challenges):

• Policy Challenges: The volatility in TOP prices underscores the need for effective policy interventions, including agricultural value chain reforms and improved storage facilities to stabilize prices and support farmers.
• Farmers’ Plight: Farmers, who are often net buyers of these crops, bear the brunt of price fluctuations, necessitating measures like Minimum Support Prices to ensure their livelihoods are protected.
• Government Response: Despite protests and demands from farmers, policy responses have been inconsistent, relying on short-term measures like export bans rather than addressing underlying structural issues in the agricultural sector.

Way forward:

• Need for Value Chain Reforms: Implement reforms aimed at improving the efficiency and resilience of agricultural value chains for TOP vegetables.
• Need Price Stabilization Mechanisms: Introduce mechanisms to stabilize prices of TOP vegetables, such as market interventions, buffer stocks, or price ceilings during periods of extreme volatility. This can help mitigate the impact of price fluctuations on consumers and farmers alike.
• Minimum Support Prices (MSPs): Establish MSPs for TOP vegetables to provide farmers with a guaranteed floor price for their produce.

Mains PYQ:

Q Do you agree with the view that steady GDP growth and low inflation have left the Indian economy in good shape? Give reasons in support of your arguments.(UPSC IAS/2019)

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