Why food inflation!!

This being a vicious circle, difficult to find the start and end but as far as I think, IT Sector was the instrumental in rewriting the growth story of India Inc. It all started in late 80 with the growth saga of Information Technology sector; this sector started attracting the talent from the core industries, high profit margin/cash rich IT companies could leverage double, quadruple salary expectations for the experienced recruits. There were never like before demand of engineering graduates all across the country and existing machinery of colleges were not sufficient to meet the industry demand.

To meet the demand of engineering graduates, education sector started to grow as an industry in it and in the past decades ample number of engineering colleges mushroomed across the country. Now this industry is producing engineering graduates more than what they are required globally; this is my assumption.

High salary packages of IT industry apparently pressurized other sector to revise their base packages and to preserve brain drain, manufacturing and service sector followed the suite and offered good package and perquisites to their employees. The salary of the Entire private sector companies got revived and IT sector was an instrumental and trend setter for revival of the salaries for the entire India Inc. High salaries increased the leverages in terms of disposable income and people started spending on their wants.

Young graduates getting hefty packages started spending lavishly; there was spurt in demand for luxurious commodities, housing, food and clothing. As they were spending heavily and buying something or other, the related industries which were the net producers went for a head spin profits and thus the entire value chain started making money, money got mobilizing and started exchanging hands and in turn everyone getting a pie of the transaction.

Money and trend started mobilizing towards other cities and now this euphoria is all over the country; you find people with ample disposable income and lavish expenditure. Increased disposable income also pushed the demand of investment, the handful avenues everyone short listed being gold, housing and equity and the money started flowing. The soaring profits of these sector pulled many investor and money in turn; henceforth more money started flowing in the system.

Of all the favorite investment avenues, the Only demand which I believe will be hampering in long turn will be the bizarre demand of Housing, as equity and gold is something virtual and not much to do with a common man, but housing demand is something which is a basic need and “not a want” and unprecedented demand of housing will further push the prices of all commodities in the entire value chain.

To meet the unprecedented demand of housing sector agricultural land is getting sacrificed, agricultural land is rapidly winding up, though there are norms for not using agricultural land for housing purposes but hardly does it comply. In the past I have seen catchments of land which were used for agricultural purposes, lying vacant for few years and then emerging as residential colonies.

India is rapidly growing in population and so is the demand for housing, but if we keep on losing agricultural land in lieu of residential projects than the expected agricultural output will never be able to meet the demand of growing population and the commodities prices will be always inflated.

Now whom should we blame for the any of the inflation? Is it High Industry packages, aspirations or desire to fulfill the wants?

Images source : smartgrowth.bc.ca