To Indians, nothing can bring more tears to the eyes than an onion price hike. After all, it has led to the fall of governments and inflicted debilitating losses on farmers in the last few years. But what really baffles policy analysts is its recurring nature and most importantly, consumer sensitivity to its price hikes.
Onion, like any other item, derives its price through market forces. Typically in the event of a shortage, the increase in demand would be fixed by a rise in price and a change in consumption patterns. However, in the Indian case, that is not allowed to happen. Every time when there is a price increase, the government steps in to distort the market price by imposing stock limits and export bans, thereby preventing the market from functioning as it is.
CPPR Project Assistant, Varshini Sridhar writes..