Food has become more expensive than before. One doesn?t have to eat out to realise that. Kitchen managers can vouch that the cost of preparing home-cooked food has become much higher. And this higher cost doesn?t arise entirely from higher prices of cooking gas. The stuff being cooked itself has become much dearer. This includes common pulses like arhar, moong, and masoor, not to mention fruits & vegetables, spices and fish. With eating at home more expensive, inflation is no longer a distant enemy.

As the wholesale price index (WPI) inches closer to 6%, familiar fears have started surfacing. With elections round the corner, there?s hardly anything more sensitive than prices that?s likely to figure prominently in the consideration set of voters. Beginning with the ?onion? elections in Delhi about a decade ago, several polls have been decided by prices of essentials. As Parliamentary elections get closer, as well as those in some key states, the firmly north-bound prices contain serious scope for discomfort for the country?s political classes.

But why are prices rising? Is it because of oil? With spot prices of global crude oil crossing $100 per barrel, oil is definitely one of the drivers. But why should high oil prices increase the cost of pulses, or fruits, which are grown at home? After the recent revision of retail prices of petrol and diesel, which has more closely aligned domestic and international prices, there haven?t been any more changes in domestic petroleum prices. Then is it because people have suddenly started eating more pulses and fish? Well, pulses are not really close substitutes of rice and wheat. Irrespective of regions and incomes, they have been staple fodder for Indian households?rich or poor?down the ages. As far as fish is concerned, the outbreak of bird flu and panic culling of chickens might have seen a spurt in fish prices in West Bengal and some neighbouring states. But again, that?s not a convincing explanation for increases in fruit and vegetable prices.

Rise in food prices in India is essentially a result of supply shortfalls. With demand unchanged, lower supply leads to lower availability and concomitant price increases. In times when supplies are fine, food prices do not contribute to inflation. Other than food prices, inflation can pick up due to higher prices of oil as well as manufactured items. However, from a common man?s perspective, higher food prices make him most conscious about inflation since he starts feeling the pinch on almost a daily basis. This is precisely where the current bout of inflation has acquired a damaging dimension.

The euphoria over 9% GDP growth has made many overlook the fact that most of North India didn?t get usual rainfall this winter. This might affect the rabi output. There are already reports of oilseeds production taking a hit and forcing customs duty cuts on a variety of edible oils for increasing imports. There will probably be more supply concerns for other crops also, if the overall rabi crop is much smaller this time around. On the oil front, global crude prices show no signs of relenting. Though with elections drawing closer, further pass-throughs are unlikely, the ?imported? pressure on domestic prices will continue to remain.

This brings us to manufacturing. Normally, policymakers do not tend to lose their sleep over some escalation in manufacturing prices. Good demand for manufacturing usually results harder prices. However, this time the situation is somewhat different. Domestic manufacturing is facing difficulties on account of high prices of imported raw materials, particularly metals. Sustained high input prices will, sooner or later, force producers to increase finished product prices. This is likely to unleash a chain effect of price rises throughout the economy as users of manufactured inputs also start raising their prices. Higher prices of auto parts leading to higher prices of passenger cars are a typical example. The worst-affected will be the average consumer. With high food prices hitting hard at home, the situation won?t much better outside with purchasables also becoming dearer.

In India, growth and prices usually tend to move together. Either they rise in tandem, or remain moderate. There is no doubt that high growth with low prices continues to remain the foremost objective of macroeconomic management. However, in a country where supply isn?t very fast in responding to changes in demand, flare-ups in prices are unavoidable. Thus high growth with moderate prices are hard to achieve on a sustained basis. Unless supply-side constraints are taken care of. How? The spread of organised retail, particularly food retail, can help by ensuring quick delivery of agri-produce to consumers. That might involve a greater participation of foreign retailers. Is that politically worse than high prices?

?The author is a visiting fellow at Icrier. These are his personal views