Foods have defeated the government

MOSCOW. (RIA Novosti economic commentator Vlad Grinkevich) - Rosstat (the Federal State Statistics Service) has reported that since January the price of the minimum subsistence food basket has gone up by 17%. Federal officials are shrugging their shoulders - they can do nothing against global trends.

In the meantime, the regional authorities are subsidizing the production of bread for low-income families and setting up reserve grain funds; those who are unable to cope with the growing prices themselves are asking the federal government to regulate prices on the essential foodstuffs.

Skyrocketing prices on basic foods are leaving inflation far behind. According to Rosstat, from January to August, the price of the consumer goods basket has grown by 12.4%. Food products are the hardest hit and their prices keep growing. Price hikes on milk and meat are the highest of all. In September alone, the price of milk has increased by 9.4%, sour milk products by 7.5%-7.9%, and beef and pork by 7%-8%. Prices of millet, semolina, oatmeal and pearled barley have risen by 4.1%-4,5%, and on peas and beans by 3.1%-3.6%.

Regular visitors of grocery stores are bound to notice that in many cases official statistics does not reflect the real situation (primarily due to its counting methods). This conclusion is buttressed by chain retailers. They have registered higher price increases - about 60% on vegetable oil and dairy foods, and 40%-45% on meat, bread and flour products since the beginning of the year.

Sad as it is, experts predict that prices on vegetable oil and dairy products will grow by another 15%-20% before the end of this year. Meat will also become more expensive because of a 30% increase in the cost of mixed feed. The root cause of price hikes is Russia's integration into the world economy. The growth of prices on foods has been caused by objective global reasons.

Foods are becoming more expensive all over the world - the developing nations are eating too much. The economies of India and China are making rapid progress; the incomes of their multi-million population are steadily growing, causing an adequate increase in consumption levels. They are short of foods and have to import them, pushing global prices further up. But this is only one of the reasons.

While helping our government to fill in the budget for many years now, high oil prices have been hitting at the pockets of our citizens. Expensive hydrocarbons are encouraging the development of bio fuels from grain (to produce fuel spirits) and oil plants (to make diesel fuel). There are some temporary factors at work as well, such as this year's poor global sunflower harvest or wheat crop failures in some countries.

But even the most logical explanations are not likely to satisfy millions of Russians who are already spending most of their incomes on foods. The local authorities are doing all they can to improve the situation with subsidies or special grain funds. The Russian Grain Alliance has suggested setting up a powerful federal grain fund. Governor of the Kemerovo Region Aman Tuleyev has asked Prime Minister Viktor Zubkov to enforce state regulation of prices on essential food products because "it is not possible to contain their growing prices in an individual region for a long time."

The powers that be are also thinking about state regulation of prices. Members of parliament have offered the government to draft a bill on its comprehensive influence on price formation. Deputy Chairwoman of the State Duma Committee on Economic Policy Yelena Panina specified that "this is not a return to administrative price regulation but an attempt to improve market mechanisms of the government's impact on prices and tariffs in order to facilitate economic growth and settle social problems."

The government is also trying to curtail the growth of prices. On October 8, Minister of Economic Development Elvira Nabiullina announced the intention to impose export duties on grain with this aim in view. But this step is not likely to help the government fulfill its promise to keep inflation below eight percent this year. In Rosstat's estimate, in September consumer goods prices went up by 0.8%, while inflation reached 7.5% from January to September. Experts are convinced that the remaining half a percent will be picked up before the end of October.

The opinions expressed in this article are the author's and do not necessarily represent those of RIA Novosti.

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