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Another Article About the State of the India

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You have to love the Internet. Even the slightest typo generates fascinating results.

Here I was Googling the State of the Union, and accidentally typed State of the Onion, and lo and behold, that’s a story. And since everyone else is rehashing President Obama’s speech last night, I figured, hey, today, let’s see what’s going on with onion prices in India.

For the past few months, India had been rocked by soaring onion prices. Last December, Businessweek reported that onion prices had jumped 33.5% from a year earlier. So enraged over the price jump, the people of India, for whom onions are a culinary necessity, erupted in nationwide protests, criticizing the government for failing to control the runaway inflation.

The media reported the story with all the headline puns you’d expect, like the LA Times' “India In Tears Over Skyrocketing Onion Prices,” Marketwatch’s “Onion Prices Make Mumbai Investors Teary-Eyed,” and, my personal favorite, The Times of India’s “Onion Woes Still a Weeping Matter,” which would be a great title for a Bhangra-Country song.

But good news. It appears that the price of onions in India has at last turned a corner. Rajendra Sharma, General Secretary of the Onion Merchants Association, told the Economic Times that wholesale prices of onions are expected to fall to Rs 15/kg by the end of January and Rs 10/kg in February.

Prices have fallen most drastically in what the Economic Times calls “prominent onion markets” like Lasalgaon and Pimplagaon. In Lasalgaon, for example, onion prices are now being sold at Rs 13 per kg, down from 67 on December 21st, a drop of 80 percent.

Still, the plummeting wholesale prices have yet to trickle down to the retail market. Btu while it could still take days or even weeks before India’s masses can breathe a collective sigh of relief, there is a renewed sense of optimistic that India’s national nightmare is coming to an end. And that’s not just good news for the nation’s 1.15 billion people. It’s also good news for the government.

In a January 19th Op-Ed in the New York Times, Manreet Sodhi Someshwar makes the case for why high onion prices are historically tied to failing governments.

In 1980, Indira Gandhi ousted the ruling government by appearing at election rallies with strings of onions. The message was clear: If you can’t manage the price of onions, how do you manage the country? A recent poll showed that the Congress Party would lose its parliamentary majority were an election to be held now.

The government is scrambling to bring the price of onions down. It has banned export of onions, turned to Pakistan for imports, and the prime minister has held cabinet meetings on the issue. Pakistan complied briefly before turning hostile, and now India is threatening in turn to halt cement exports.

As Businessweek notes, over a decade ago, India was hit by a similar onion crisis which drove inflation to nearly 9 percent. At the time, many of the political parties in power were voted out.

Still, even as onion prices fall, passions remain high. Now, onion farmers are protesting the sudden drop in prices. One India reports that police have even had to resort to “mild cane-charge” to deal with the protesting farmers. In a sad twist, when hearing of one angry protest, Yashwant Sonawane, a 46-year old collector, traveled to Chandwad near Nashik to try to cool things down. After an altercation with someone who was apparently trying to steal kerosene from a tanker, Sonawane was trapped inside his car while a band of criminals doused it with kerosene and set him ablaze.

While it could take months for things to get back to normal, the latest news about onion prices in India is encouraging. And it’s important to remember that what’s good for the onion is good for India. And in our ever entangled global economy, what’s good for India is good for the rest of us.

And so, with that, I’m happy to report that the State of Onion appears…okay.
POSITION:  No positions in stocks mentioned.