The inflation figures are soaring due to rise in prices of food items, primarily potato (136%), pulses (40%), onion (15.4%) and wheat (14%). Supply side constraint has been sighted as the primary reason behind this recent surge. It’s true keeping in mind the draughts and floods that we have faced this year. To add to this, we have a completely unregulated part of supply chain between farmers and retailers where the final mark up at which the consumers pay can go over 500%!
You will get plethora of information describing the current situation on the internet. I wanted to discuss what lies ahead. We now have two primary challenges
1. Supply side constraints
2. Artificial price hike due to unreasonable mark-ups and hoarding
And a pseudo challenge of increased money supply (I will explain later why I call it pseudo challenge).
