• The covid-19 epidemic has had a profound effect on prices.
• It is not just food prices, but the gold has also reached a record high in covid times.
• Record supply chain disruption has led to the fastest rise in Global input prices.
Surging food prices is not the only thing that is driving up the prices, covid-19 also had an impact. Many sectors such as transportation, health and personal care have also seen a sharp increase in prices, which economists say due to pandemic.
Spikes in some food prices:
Disruption of food supply due to COVID-19 has affected both food production and distribution, escalating in some cases to inflation. South Asia has been the most affected regions. In India, covid pandemic push inflation to 7.6% in October 2020.
Boost in gold prices:
As per the World Gold Council, India’s gold demand crashed to its lowest in 26 years in 2020 worse than a 28% decline globally, due to covid-19. Lockdown just not only hit the demand but also supply in the country.
Reduction in oil demand:
We have seen a temporary reduction in travel due to a shift towards the work from home model. Which leads to a decrease in gasoline demand. Many people are also using a personal vehicle to travel which might offset the reduction in demand.
Let’s check out what factors are behind such inflation in the Indian market:
Inter-state movement barriers and covid restrictions:
Inter-state movement barriers lead to the difficulty of movement from rural to urban areas and closed markets hit demand for many commodities across India. A demand and supply mismatch and labour shortage affecting the loading, unloading, and sorting of commodities, caused by the restrictions are some major contributors to food inflation. Many commodities faced raw material shortages due to supply chain disruptions adding to the cost of products and ultimately facing an increase in prices.
High transportation cost:
As transportation companies struggle to cross interstate boundaries due to covid restrictions leading to increase in transportation cost within the countries. Temporarily closed economies and severely affected global supply chains led to the shortage of both raw material and logistics capability.
A not so sustainable supply chain:
Even today supply chain lacks global resilience and is breaking down due to covid. A lack of flexibility and talent gaps across the supply chain and its operations continue to make the supply chain less versatile and more human workforce driven. The use of AI and analytics-based technologies are crucial in understanding complexity, anticipating potential future disruption, and quickly developing a response.