Despite good yield, food prices to stay

Output of major crops, including sugar, will be better or equal to 2008-09’s production figures, but food prices are unlikely to return to that year’s levels.

Output of major crops, including sugar, will be better or equal to 2008-09’s production figures, but food prices are unlikely to return to that year’s levels.

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Food inflation may have permanently changed to stay on the higher side, economists have said. For a UPA government battling high prices, this could be a gloomy piece of news.

A surplus monsoon has boosted acreages of all crops, according to food ministry figures. Output of rice, the principal summer staple, will be slightly lower than 100 million tonnes, despite a drought in Bengal, Jharkhand and Bihar, agriculture minister Sharad Pawar said on Thursday.

Pawar announced a subsidy worth R500 crore on diesel used by farmers in these states for irrigation to cope with the drought on Friday.

Output of wheat, to be sown in winter, could be around 82 million tonnes, owing to good soil-moisture levels. Sufficient sugar stocks, of around 22-23 million tonnes, are also expected in the new sugar cycle starting next month.

However, high food inflation no longer looks temporary. “Actual prices will not come down because food inflation has acquired a large permanent component, like higher crop prices and production costs,” said N.R. Bhanumurthy, an economist with the state-owned National Institute of Public Finance and Policy.

India’s food prices rose 15.10 per cent in the year to September 4, under a new wholesale price gauge introduced this month. Economists such as Bhanumurthy said higher money wages could alone offset inflation.