Photograph by Phil Ostroff
Photograph by Phil Ostroff

How India’s Onions Explain the Developing World

Few foods in India are consumed in larger quantities than the onion. It’s a crucial ingredient in most traditional dishes, and at a high rate of production is one of the cheapest foods you can buy. Until recently. The price of a kilo of onions (about 4-5 onions) has soared. Last year, the price of a single kilo rose 278 percent. In any country, a hike that dramatic would lead to a government inquiry. In India, where 269 million people live on less than 60 cents a day, the spike is debilitating.

It’s hard to know exactly what caused it. The country’s booming demand has roiled the food market, but everyone knew that was coming. Unpredictable climate fluctuations are never friends to farmers, yet that’s true anywhere on Earth. The bigger problem is an archaic distribution system that can’t keep up with demand. The Economist recently followed the trail of an onion from the field to the consumer, a breathtaking display of waste and inefficiency. Between the farmer and consumer are as many as five middlemen. The onions are unpacked and repacked at each transfer, increasing bruising and spoilage rates and, in effect, prices.

Economists refer to a problem like this as allocative inefficiency. The problem of onions taking the long route to the consumer isn’t something that a few big retailers and streamlined trucking couldn’t fix. That technology isn’t new. India’s issue is that the process of food distribution is ingrained in the country’s culture. Things are done the way they’ve always been done, lagging decades behind modern technology. Or more simply: Change comes hard.

Inviting Walmart to bring its economy of scale to India’s booming consumer population, as India tried to do in 2012, doesn’t quite work because it means uprooting a core part of India’s social fabric built on person-to-person relationships. (Indians by and large rejected Walmart). It’s also easy to understand why the Indian people would resist a foreign retailer telling them how to distribute onions faster: sure it’d be more efficient, but with so many people involved in processing a single onion, a few hundred 18-wheelers could easily kill millions of jobs.

The problem of India’s onions is a case study that makes economics come to life. Yet it also illuminates the biggest drawback to simply thinking about developing countries as simply numbers on spreadsheets. Debating how much a new highway would cost or how many new schools would be needed to make young girls literate ignores the reality that sometimes, people don’t want those changes, or they’ll be much slower to accept them than first-world latte drinkers think they should. That’s not a question of developing countries innovating their way to global competitiveness. More often, it’s a matter of old societies simply trying to catch up.