Finance Minister Pranab Mukherjee on Saturday admitted that the government had a problem on the food price front due to a dichotomy in the wholesale price index (WPI) and the consumer price index (CPI).
"On the food price front, we have a problem. Before the last week, the WPI was negative. That is no satisfaction to the ordinary consumer because the CPI was moving up," Mukherjee told reporters on the margins of a seminar.
"This dichotomy is worrisome because we are concerned with the high prices of essential commodities and food articles," Mukherjee said after participating in a seminar-cum-interactive session on the proposed direct tax code, organised by the Confederation of Indian Industry (CII) in Bangalore.
Asserting that he was not in favour of curbing credit as such a measure would have an adverse impact on the economy, Mukherjee said the government had resorted to tight money policy last year to make credit availability difficult and control price rise.
"At this point of time, I cannot accept the dear money policy or credit curbing because that will have an adverse impact on the whole economy."
In the aftermath of the global financial crisis that started a year ago, the government was faced with the problem of either continuing with the tight money policy that would have curbed growth or encourage growth though risking higher prices.
In the WPI, the weightage of the food articles is 16 but in the CPI, there are four indexes for rural, rural agriculture labour, urban, non-manual and employees and for rural poor.
"In the four price indexes of the CPI, food articles have seen weightage increasing to 56 percent from 48 percent. Therefore, there is a dichotomy on the price front due to the negative WPI and the CPI moving up," Mukherjee pointed out.
To prevent the adverse impact of the rising prices of essential commodities, the minister said the government had encouraged import of sugar, edible oils and pulses under the open general licence (OGL) without any duty as they were in short supply right now.
"Secondly, we are requesting the state governments to revamp the Public Distribution System (PDS) so that at least below poverty line (BPL) families are protected by providing subsidised food items - sugar, rice, wheat, kerosene oil in the ration shop," Mukherjee added.