kyleighwhite

Source

How India’s growth ended in tears

It's enough to make a poor man cry and a wealthy investor sprint for the exit. From the back of a van in Delhi's chaotic Karol Bagh market, opposition politicians are selling discounted onions to disgruntled voters ahead of next year's general election.

The humble red onion, heart of the vegetable curry most Indians depend on, has more than trebled in price in the last few weeks and opposition leaders hope the increase will take a large bite into the Congress-led government's remaining support.

Peeling back its bashed, husky outer skin to its tear-jerking inner layers reveals not only the story of why its price has risen so sharply in the last month, but why the rupee has bombed in the foreign exchange markets and how India's all-action 'growth story' has become a real weepy.

Last week, as the rupee tumbled below 63 to the US dollar and crashed through the 100 rupees to the pound barrier, onions were an unaffordable 80 rupees per kilo. The government may need to import them to increase supply and push back prices, but that option will become more expensive as rupee rates fall lower every day.

The immediate cause of the increase was the heavy monsoon rains in Maharashtra which left the vegetables rotting in the ground, but the price may not have soared so high had the government been strong and decisive enough to reform its agricultural sector when it first planned to in 2009.

It hoped foreign supermarkets like Tesco and Walmart would come in and revolutionise India's backward agricultural sector. Forty per cent of all Indian produce rots on clunky bullock carts and rough baked roads before reaching the market. When they arrive, farmers get a tiny fraction on the retail price as as they pass through at least five agents, each taking their cut. Of the eighty rupees per kilo they were selling for last week, the farmer's share was just eight.

India needs new smooth roads, cold-chain storage and modern transport logistics to replace sweaty bullock carts, and direct sales from farmer to retailer to stabilise prices, increase farm incomes and reduce food inflation -