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Onion export ban lifted as prices ease out

India’s food price index rose 11.05% in the week ended February 5, the lowest in two months and sharply lower than 13.07% recorded a week earlier. HT reports.

business Updated: Feb 18, 2011 02:01 IST

India’s food price index rose 11.05% in the week ended February 5, the lowest in two months and sharply lower than 13.07% recorded a week earlier. Food prices have eased on the back of fresh arrivals of vegetables, especially onions, prompting the government to waive a ban on its export.

Yet, the double-digit food inflation is still above tolerable limits — it is just over 4% in inflationary China — but the government expects it to moderate after March. Finance minister Pranab Mukherjee, echoing Prime Minister Manmohan Singh, said on Thursday he expects headline inflation to ease to 7% by March-end. http://www.hindustantimes.com/Images/HTEditImages/Images/18_02_pg10b.jpg

Like most Asian economies, high food prices in India are stoking “core inflation” or inflation in non-food and non-fuel items. Food inflation has risen 17% over the past one year.

“We want to deal (with) it (inflation) in a manner the growth rhythm is not disturbed. If we were concerned only in curbing inflation, we could have done with pursuing tighter monetary policies...if in the process the growth rate gets hurt, that would not do our country any good,” Singh had said.

The ban on onion exports was clamped in December when rains damaged crops and pushed up prices.

Market speculation of a major shortfall — despite actual crop damage of 10-12% — caused onion prices to quadruple. The government intervened aggressively to augment availability, including contracting 1,000 tonne for import from Pakistan and cracking down on onion traders suspected of stocking up.

In less than a month, fresh harvests from late-sown varieties, along with the export ban, improved supplies and sent wholesale onion prices crashing to a record low. In January, the lowest variety was trading under R5 a kg at Lasalgoan, near Nashik. The price crash riled farmers.

On Thursday, an inter-ministerial panel on food, led by finance minister Pranab Mukherjee, decided to allow export of onions, setting a minimum export price of $600 a metric tonne, an official said.