A few days ago I was at my local grocery shop buying groceries which included a 500 ml milk packet, when the shopkeeper informed me that it's price has increased. I said okay but while making payment I had a weird Deja vu moment. Did I have this exact conversation with the exact person in exact place earlier too? And that's when it hit me. Price of milk did hike earlier this year and so this was a second price hike 6 months. I shrugged it off anyway. Days go by and I hear that Amul is hiking it's milk prices by 2 rupees followed by other popular brands in a span of next few days.
Now, me being me, I did some digging and it turns out that the reason is pretty simple, In fact it's one of the basic principles of economics: Demand and Supply. In fact, It's so basic that you don't need a econ geek to understand it, a meme is enough it explain it-
As long as there is demand for some stuff, people are willing to produce it in hopes of earning from it and as long as there is supply of some stuff, people are out there buying it. In case of milk particularly, demand declined at the beginning of pandemic as people had less money for expendable purchases. Ever since then, demand had been growing gradually and it reached pre pandemic levels a few months back.
During this time, price of inputs for milk production started inflating, dominated by a 20% hike in cattle fodder prices year on year as it's supply was affected by an extreme change in weather. Other contributors are cost of logistics, manpower and energy. Industry experts expect the situation to get gloomier before a turnaround in October when fodder prices are expected to stabilize. Therefore, an average consumer might have to dig deeper into their pockets in the coming times.
Now, one might argue, it's just a 2 rupee hike, it's not going to change grocery lists that much drastically. But isn't milk kind of an essential part of Indian diet? Isn't it a must have for Indian households, specially those having growing kids in their home. With a third price increase expected soon, it is a reflection of the misery of Indian households that are suffering under the burden of high inflation and sky rocketing price of essential items. With India's Wholesale price index (WPI) making new records as recent as may, question is, how much is enough?