The Political Economy of the Indian Onion

The onion, has strangely occupied my mind for longer than any vegetable justly should- I wrote about the Political Economy of the Onion for my monthly college editorial, and also researched about its Trade Patterns through Indian History for my assignment in one of my classes. So it only made sense for me to write about it for my first blogpost- as a sense of a final closure upon this devil vegetable. 

One of the reasons, I call it the devil vegetable is its sticky interlinkage with politics, making the problem of the onion in India, one of political myopia. The irony of this vegetable lies in its power to make and to break governments. For example, in 1980, Indira Gandhi made her comeback to power, driving out the first non-Congress led government at the Centre in the ‘Onion election’, as they called it. Sky-rocketing onion prices ensured that Sushma Swaraj, who had been appointed as the chief minister of Delhi only forty days before Delhi went to polls, lost to Sheila Dixit, who stayed in power for the next fifteen years; and undoubtedly, this staple in every Indian household saw a decline in its price. 

Onion and rice, in India, was considered a poor mans meal- part of every household, it seems to be a vegetable that most of us can relate to. In this, it then tends to cut through economical, social, and geographical strata in this country. This is why it is used as the correct indicator of everything that is wrong in the market, a powerful proxy for economic well being. And in this familiarity and relatability lies the answer to my first question - Out of everything, why is the onion used as a political tool? 

In terms of basic economics, price rise is a direct fallout of the demand and supply imbalance. The onion is not immune to this. The policy towards controlling the price rise of this particular vegetable is one of a quick-fix solution: the government will stop exports, increase imports and raid on traders for hoarding, thereby artificially reducing the price in the market. But these quick fixes are just that- short run solutions to a deeper, inherent problem, and these quick fixes cause a long run disincentive for the farmers, who then hesitate to extensively cultivate onions. 

I dug through my library to find the UN FAO Trade Yearbooks from the pre-liberalisation period, when the agro-food polices were directed toward import substitution and self sufficiency. The graph below shows the historic trends of Export (1000 Metric Tonnes) and Imports (Metric Tonnes) for India over the years 1952 to 1991.

It is fairly evident that India is a major exporter of onions, the question that quickly followed in my mind, was to what regions does India primarily export, for that, I shortlisted ten countries, by share of onion export from India, over a period of ten years and figured out—

So then what is the impact of the Onion, which is so widely exported from this country, being a political tool, and its exports and imports being the first line of Defense against the surging prices in the market? The countries to which this devil vegetable is exported to, of course faces a shortage in the market in thereby searching other markets to fill this void. But also faces market shocks with India. For example, in June last year, India withdrew 10% export incentives on onions after the prices had started to rise due to dwindling supplies from the previous years harvest and the subsequent delay in planting. In September, because of the already high prices in the domestic market, India banned exports with immediate effect. as a result, the prices of onions in Bangladesh also increased exponentially. 

The need of the hour is in moving past these quick fixes of export and import strategies of controlling price, and to move towards a more comprehensive policy. An important question for us as students of Economics, is whether India can even handle frequent onion crisis without fixing its distortionary farm economics? Arabinda K Padhee, the Country director, ICRISAT believes that the current onion crisis is caused by weather conditions, which nobody has control over- one solution is to research in terms of more onion varieties that can withstand these conditions. In the consumer vs farmer debate, the farmer should obviously receive the maximum benefit, and when the rates go up, these prices should also percolate down to the farmers, and not just to the middlemen. A long term solution for the sustained supply of produce would be storage structures- pockets where these onions may be arranged.