Understanding and fixing the 244% inflation for onion prices in India

An article in the Financial Express titled “Dousing the vegetable fire” (October 11, 2013) describes the 244% price rise between between August 2012 and 2013. The authors highlight that 50% of the onion production in India is in two states – Maharashtra and Karnataka, and these states control 70% of the flows between states. Over 60% of the onion crop is in one season and thus most of the demand is satisfied from inventory of onions. Onion demand is fairly inelastic given its role in the Indian meal. Thus, small fluctuations in onion usage results in sharp price increases – supply driven prices. Can government intervention to create buffer stocks and enabling of dehydrated chopped onion technology be the solution? Will changing the Indian APMC (Agriculture Produce Market Committee) regulations (that require produce to be sold in government regulated markets) to enable more competition along the supply chain be the solution ? Or will easing of imports by dropping the current 30% import duties provide the necessary relief valve to solve the problem ?

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About aviyer2010

Professor
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