Fluctuating pork and inflexible onions – FT中文网

China’s inflation numbers released Tuesday showed prices increased 6.5 per cent in the year to July with food inflation as high as 14.8 per cent, causing stock market investors to fret that monetary conditions in China must continue to tighten. Pork prices rose almost 57 per cent year on year – pork accounts for a third of the weighting of food prices in China’s CPI.

The silver lining just about visible amid the clouds is that pork will get cheaper as more pigs are rushed to market in coming months. India’s onion prices – similarly a bellwether of food inflation because of their widespread use in curries and lentil dishes – look more of a structural problem, however.

Onion prices doubled in some parts of western India last week because of the lateness of the monsoon. India’s food inflation was 8 per cent in July. Last month, the central bank raised interest rates by an unexpected 0.5 percentage points because, it said, inflation was unacceptably high. Economists said expectations among households of double-digit inflation had prompted the central bank to surprise the market with a big hike.

India’s problems on the food front are more intractable. Supply chain problems – such as a lack of decent highways and refrigerated containers to move food – mean that roughly 30 per cent of fruit and vegetables rot before they get to market. Meanwhile, India’s agricultural productivity is much lower than China’s, partly because the government has for decades invested less than it should have done in supporting widespread adoption of drip irrigation, for instance, and partly because educational levels of its farmers lag well behind those of China’s.

According to the United Nations, the average mainland Chinese citizen ate 49kg of vegetables in 1980; by 2003, that number had risen to 270kg. Some analysts are saying that the Indian government’s work creation scheme in rural India has pushed up demand for vegetables as poor Indians eat better. Given the structural problems in India in terms of both producing and transporting grains and vegetables, food inflation looks set to continue for some time.

China differs from India with a lower degree of troubles. Infrastructure is there, productivity is higher. This becomes the key to reading China vs India. 

via Fluctuating pork and inflexible onions – FT中文网.

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