She's right. This year, prices of primary commodities and vegetables are ruling much above their six-year averages. The spiral is reflected in the wholesale price index (WPI) that went up to 5.24 per cent on June 10, compared to 4.72 per cent a week ago, making it the highest rise in a year. The higher than expected rate sent government bond yields to a new four-year high—the yield on the benchmark 10-year bond rose six basis points to hit 8.19 per cent. Even the Consumer Price Index for urban non-manual employees touched 6 per cent in May, but both these indices are very imperfect measures of inflation on the ground since both work with a lag. There is an effort to broadbase the WPI by more than doubling its list of commodities from 435 and make it more current but that will take some time.
To bottle the price genie, the government banned export of a few commodities, including pulses, and allowed duty-free import of wheat and sugar—some 2.2 million tonnes (mt) of wheat will be imported—but these measures only affected traders sitting with large stocks. The damage to the consumer had already been done. Also, the import decision may not cause a significant dip in prices in many commodities where India is a leading consumer as its decision to trade sets global price trends. For instance, the world pulses market is thin and higher imports by India will not lead to lower prices. In the case of edible oil, 4 mt of which is our average annual import, the market would factor in Indian demand. Even in sugar, where Indian imports are erratic and the world market is tight due to rising energy prices (sugar is base for ethanol, a biofuel), prices are not exactly set to tumble.