India’s situation is a basic example of supply and
demand. The reduction in supply causes
prices to rise which will put some consumers out of the market or cause them to
buy less of the product. The article
explains how this relates to India and its own citizens. We can also look into how this would affect
trade with other countries. With their
scarce supply of onions to put on the market, India will have fewer onions to
sell nationally as well as fewer to trade.
If India were a large country whose input affected world supply of
onions, a significant reduction in the supply of the crop could alter the
equilibrium price for onions at a world level.
If the country were to be considered a small country as it relates to
its contribution of the crop, India’s output could end up having more of an
effect on the country itself but not such an effect on world prices. The overall effect of this on a global scale
depends on the percent of world output which comes from India.
Friday, September 13, 2013
Consumers in India are facing a rapidly weakening rupee and the country's slowest economic growth in a decade.
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The scarcity of onions in India not affect not only internally but as well as externally.In fact, as India produces Onions, it is possible that it even exported some of its produce to the rest of the World.By the decrease of Supply internally, external trade also must be affected.This in fact will decrease the quantity of onions in the world market and also increase its price.As we can see now,Indians who produce onions face high price,likewise the other outside world who depended on onions from India face the same problem of high prices.
ReplyDeleteThis comes in relation to what we learn in class about external trade that,in trade all the participants in the chain of a certain commodity will eventually be affected by one of the member not to engage in the chain.No trade, or restrictions affect the trade terms.Here we can notice that, India also must have protected its business in trade by not allowing imports of Onions from other countries to protect its position in trade.
The scarcity of onions in India not affect not only internally but as well as externally.In fact, as India produces Onions, it is possible that it even exported some of its produce to the rest of the World.By the decrease of Supply internally, external trade also must be affected.This in fact will decrease the quantity of onions in the world market and also increase its price.As we can see now,Indians who produce onions face high price,likewise the other outside world who depended on onions from India face the same problem of high prices.
ReplyDeleteThis comes in relation to what we learn in class about external trade that,in trade all the participants in the chain of a certain commodity will eventually be affected by one of the member not to engage in the chain.No trade, or restrictions affect the trade terms.Here we can notice that, India also must have protected its business in trade by not allowing imports of Onions from other countries to protect its position in trade.
The fact that the up to 40% of the onion crops are rotting due to poor transportation routes is very intriguing. If India could improve their transportation conditions and methods I believe that they could then open up trading of their onion on a more global scale. By doing so, I believe that the domestic price of the onion would rise even more as India would be issuing more of the crop to outside sources as they could potentially make more revenues by doing so. It is interesting to then use the Standard Trade Model we discussed in class to come up with the potential affect this would have on India's market. I believe that the increase in onion exports and the coinciding increase in onion prices would follow with a decrease in onion consumption from the general public and a resulting increase in the imports of a different but substitutable crop.
ReplyDeleteAs one of the top two largest producers of onions in the world, India’s increase in onion’s price could be felt globally if continued. Apart from India’s size, the country produces enough onions to shift the price at a global level. With 500% increase in price in one month and inflation rate at approximately 6%, the Indian citizens are already experiencing a scarcity in onions, which compel them to adjust their budget. They are forced to consume less when most of India’s main dish requires much use of the product itself. China is the number one producer along with the United States (third) would have to produce much more along a fourth country in order to not have an increase in the price of onions if such matter continues.
ReplyDeleteIndia has to work on his infrastructures, do a better job at forecasting, and, at least, do better at storing and transporting the products in order to have a better outcome.
I agree that this is a typical situation of supply and demand. A poor harvest means less onions which leads to a price increase for onions. But a poor harvest in one country can be balanced with a good harvest in an other country. That means India´s temporarily scarcity does not necessarily lead to a price change. But the food prices in general increase in the last decade significant. So that there may be other reasons for an increase in global prices for food commodities like stock trading.
ReplyDeleteAfter further reading into the subject it seems that Tyler was right on the money with a need for better economic infrastructure. Economists in India are upset with the consistent lack of framework for macro investment. The problem seems to stem from India's Parliament rejecting Foreign Direct Investment until last year as the economy started to stall. Now foreign investors are too unsure to enter India's volatile economy. It would take a great deal of private investment to create the cold supply chains that would increase the efficiency of crop transportation. With foreign help seeming unlikely, India is turning to their newly appointed Reserve Chairman to promote economic reform within the country. Though with the feds limited power it seems to be a lost cause.
ReplyDeleteIn my opinion, nowadays India's economy is showing signs of overheating with a growing demand and inability to match it with supply. Ideally, the price increases could threaten to worsen consumer price inflation and widen the country’s already large international trade deficit. However, not all the prices of the goods demanded in India would get influenced immediately. For example the garlic and the onion, which belong to the basic daily necessities, won't change a lot in the quantity of supply or demand. Because the elasticity of these basic daily necessities is low, whatever the prices of these commodities are high or low, everyone would still purchase them for cooking meals. These goods can't be substituted anytime in Indian economy, so even some kinds of the goods don't have any comparative advantages in a free market, most of consumers or producers would choose them, and the supply or the demand won't be affected by the prices from the foreign trading environment.
ReplyDelete