The Indian economy and the onion

The Indian economy has been at the center of political talks recently with the Indian rupee falling to a new all-time low relative to the US dollar.[1] Now I would regard myself as far from an economist but such a downturn is such a pivotal issue that cannot be ignored, or in my case, not written about. But in order to make the everyday impact of the fall of their currency more understandable, perhaps a commodity key to the Indian economy and people generally, the onion, would best outline the effects of such a financial plummet. Why the onion? Well on Sunday 18^th August, forty tonnes of cargo was robbed from a truck on the Delhi-Jaipur highway.[2] What were the robbed items? Fourty tonnes of onions. With this in mind alongside a comment from a Planning Commissioner interviewed by the Times of India, stating, the “onion, is the only way inflation is understood by ordinary people” this eye-watering bulb can be used as a tool in analysing the public’s concerns over inflation and basic commodities within India.[3]

The onion in India is a key commodity, an essential ingredient to even the most basic meals with the country calculated to consume fifteen tonnes a year.[4] However, as the rupee continues to plummet in value and onions are becoming increasingly scarce due to droughts damaging harvest rates, prices have soared nearly five-fold, from approximately 20 rupees (20 pence) to 100 rupees per kilogram.[5]  Now as much as these droughts admittedly do not have any substantial link to India’s economic downturn, with no amount of money able to buy Mother Nature’s loyalty, the financial climate has limited the government in its ability to rectify this issue. In order to try and preserve onion stock levels the Indian government banned exports for two weeks and pushed the minimum price up to discourage exports.[6] This has caused outrage across India, especially amongst the poorer in society, where this basic commodity is seen to now be reserved for the rich due to its high prices being equal to that of luxury goods such as chicken and cottage cheese.[7]

The onion is a very historically politically sensitive area in India, with its price fluctuations being influential enough to sway the electorate and oust governments. This was something seen in the collapse of the BJP (Bharatiya Janata Party) in 1998 which was partly due to public rage over the price of onions which reached 60 rupees (60 pence) per kilogram.[8] Prior to this it also saw the demise of the Janata government in 1981 in what was coined the ‘Onion Election’.[9]

Today the government faces similar outrage across the country with prices reaching up to 80 rupees (80 pence) per kilogram. This has caused widespread political unrest within Dehli with some of the bigger political parties in opposition, namely the BJP and the anti-corruption Aam Admin (Common Man), mobilising against the government. Some would say their actions are quite bold, I would say cheeky. The two parties have set up greengrocer vans in Dehli, six outlets between the two to be precise, subsidising the price of onions and selling them for between 25-40 rupees per kilo (25 pence). This is almost half the price that commercial shops are charging. With these rates being so low it is embarrassing to the government and has, some would say forced the hand of government with Dikshit, Delhi’s Congress chief minister, to reevaluate their position. This has lead to an announcement this week that the government will be establishing subsidised greengrocers of their own, selling a kilo of onions at 35-40 rupees. But how long can they maintain these prices? Are these pressurised price reductions enough to win back the electorate or will these fluctuations have future political ramifications? Well, only time will tell

 

References:

 

B’lore, Nitesh Napa Valley. The Indian Express Online (21/08/13) http://www.indianexpress.com/news/onionladen-truck-hijacked-on-delhijaipur-highway/1157800/

 

Kannan, Shilpa. BBC News Online (23/08/13) http://www.bbc.co.uk/news/business-23802653

 

Mukul, Akshaya. Times of India (13/08/13) http://articles.timesofindia.indiatimes.com/2013-08-13/india/41372368_1_onions-winter-session-mody

 

Nelson, Dean. The Telegraph Online (20/08/13) http://www.telegraph.co.uk/news/worldnews/asia/india/10255226/Indian-capital-Delhi-gripped-by-onion-war.html

 

Yueh, Linda. BBC News Online (20/08/13)

http://www.bbc.co.uk/news/business-23766267

 

Unknown author. BBC News Online (14/08/13) http://www.bbc.co.uk/news/world-asia-india-23691355

 

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