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Govt sees food prices easing down in Jan
Deputy Chairman of the Planning Commission Montek Singh Ahluwalia sees food prices moderating by January, as policy-makers in North Block worry about inflation getting out of control.
Deputy Chairman of the Planning Commission Montek Singh Ahluwalia sees food prices moderating by January, as policy-makers in North Block worry about inflation getting out of control.
Ahluwalia on Tuesday attributed the high food prices to poor distribution as he saw signals that could offset the crunch.
“The situation suggests dysfunction in distribution as retail prices have shot much more than wholesale prices and import cannot be done without subsidy as international prices are higher,” Ahluwalia said.
Food inflation galloped to a more than 10-year high of 19.95 per cent as of December 5, prompting a concerned government to think of stepping up imports to ease prices.
“Though such supply shortages due to constrained domestic production could partially be met by imports, this option is not available for some commodities, such as pulses, which are either not offered in the international market or, any rate are supplied in limited quantities,” the finance ministry said in the mid-year economic review tabled in Parliament last week.
Ahluwalia said monetary intervention could prove ineffective.
“It's a complex situation and cannot be corrected with monetary polices ... prices built up is on speculation post drought. Stocks of cereals are adequate and prices can be moderated from January,” he said.
Prime Minister's Economic Advisory Council Chairman, C Rangarajan said on Monday that a hike in Cash Reserve Ratio (CRR) was expected to tackle the liquidity. CRR is the liquid cash that banks have to park with RBI.
“The behaviour of interest rate will depend upon a number of circumstances. But probably there could be some need to reduce liquidity at some particular point after December, if the traditional decline in prices does not happen,” he said.
