India, one of the emerging markets in the world and being the tenth largest economy in the world by nominal GDP and the third largest by purchasing power parity (PPP), is one of the G-20 major economies and a member of BRICS. India’s GDP which grew by 5% in the fiscal year 2012-13, had a 4.4% growth in the first quarter between April to June of the current fiscal year. The neighboring nation China has its GDP climbed to 7.8% in the third quarter. The World Bank had made a lower forecast of 4.7% from the current fiscal year looking behind the sharp slowdown in the manufacturing and investment as well as negative business confidence. The World Bank Ease of Doing Business Survey ranked India to the 134th position and 6th among the South Asian economies behind Sri Lanka, Maldives, Nepal, Pakistan and Bangladesh. Sri Lanka remains on the top among South Asian economies remaining at the 85th position on the world’s rank.

Looking at India’s current account deficit, it had experienced the USD 88 billion deficit in the last fiscal year showing a fear of balance of payment crisis. The Indian rupee crashed as much as 20% between May and August and touched a life time low of 68.86 to a dollar on August 28. The central bank of India-The Reserve Bank of India (RBI) has reduced its economic growth forecast for current fiscal year to 5% from the earlier projections of 5.5% showing the risk stemming from domestic constraints.

With the India’s wholesale price index rose to a 6.46% for September including the consumer price index advancing to 9.84%, the onion considered as the major staple in the Indian cooking has hiked to the level of around 322% in the period of the one year following the prices of vegetables to rise by 89.37% year-on-year. The structural nature of inflation has made the price mechanism crash down on the food sector. Mainly the hike in the price of onion and other vegetables are the consequences of the supply shortage due to the excessive rains affecting the production and the poor warehouse facilities for storage and distribution. The government had hiked the export tax to 40% on onion exports to induce the leveling of the onion prices as much as low. Also, the government has made a decision to import onions from the Pakistan, Iran, China and Egypt.

The production basket of food grains, fruits and vegetables running out of production has also affected the pricing of food, fruits and vegetables in Nepal. Nepal is one of the importers of goods and services including food grains, fruits and vegetables including manufacturing goods and services from India making its 2/3rd of its total import from India. Nepal consumes around 200 million kgs of onion per year constituting 80% imports from India and 20% from China. The onion price has crossed over Rs 130 per kg in the domestic retail market in the month of August which is a rise of 384% and still over the Rs 90 per kg.