What is Skewflation?

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GS- 3 Indian Economy

Context: With heavy rains in key onion growing areas, there is a fear of price rise and hence the centre has taken steps to control onion rates in Delhi and has warned of strict action against hoarders and profiteers.

The concept of a relative price rise of one or a group of commodities is referred to as skewflation. Skewflation may also mean the skewness of inflation among different sectors of the economy — some sectors are facing huge inflation, some none and some deflation.

Difference between Skewflation and Inflation.

. ‘Inflation’ refers to a sustained, across-the-board price increase, whereas ‘a relative price increase’ is a reference to an episodic price rise pertaining to one or a small group of commodities. This leaves a third phenomenon, namely one in which there is a price rise of one or a small group of commodities over a sustained period of time, without a traditional designation. 

Skewflation was last witnessed in India in 2009 and 2010 when the food prices showed inflation and the prices of the non-food items were majorly stable.

Another point to be noted here is, since onions constitute a very important part of the food basket, thereby forming a significant component of consumption expenditure of families, therefore the price rise and fall may in turn affect the major policy decisions and may be used as a tool to turn the tide against government of the day as was witnessed in 1998 when despite the frantic import, the skyrocketing prices of onions throughout the country had caused extreme hardship to the poor and the middle classes and it led the government to topple.

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