Thursday, March 24, 2011





There are three interesting, related News on Inflation in India.

First News is that Government is admitting that Food Grains are rotting ahead of Wheat harvest.

Second News is that, Food Inflation is again creeping higher to double digit figures in March,2011.

Third News is - a statement by the Finance Minister that it is possible to maintain inflation at moderate level.

It is now almost obvious that Food Inflation is not primarily due to shortages but is due to supply chain bottle necks. Can the state and central Governments not make all out efforts to (i) find out hoarding and hoarders (ii) ensure that there is no hoarding of food items contributing to food inflation and (iii) remove all types of supply chain bottlenecks from farmer to consumer.

This inflation is hurting both the producer and the consumer. And, unnecessarily. Hopefully, the Finance Minister’s Optimism will bear fruit in coming weeks.

Govt admits

Foodgrains Rotting

ahead of wheat harvest

March 24 : Amidst a warning that the country is sitting on a "grain bomb" due to prospects of record wheat output, the government today admitted to cases of food grains rotting and said enough storage facility must be created.

Referring to CPI(M) member Brinda Karat showing samples of rotten wheat and rice in the House, Finance Minister Pranab Mukherjee said in the Rajya Sabha, "I do admit."

He also agreed that the country needs to create a big storage capacity as the food grains production has grown fast in the wake of remunerative prices given to the farmers.

"It is the fact that we could not create surplus storage capacity to our requirement. I do admit... rotten wheat," he said, replying to a debate on the Finance Bill.

Earlier during the Zero Hour, Karat raised concern that the government was supplying rotten food grains to remote tribals areas.

Food inflation

in double digits

at 10.05 per cent

March 24:   Food inflation crept back into double digits at 10.05 per cent for the week ended March 12, breaking a three-week long downward spiral, as prices of vegetables, fruits and protein-based items increased.

Food inflation stood at 9.42 per cent in the previous week. The latest rise marks the first time in a fortnight that food inflation has gone above a single-digit figure.

The latest surge in prices of food items is likely to increase the worries of the Government and the RBI, which have termed inflation control as a big challenge.

During the week under review, prices of vegetables went up by 11.20 per cent year-on-year. While potatoes became 2.82 per cent more expensive, onions became dearer by 10.80 per cent on an annual basis.

Prices of fruits soared by 23.60 per cent year-on-year, whereas egg, meat and fish became dearer by 13.21 per cent.

During the week under review, milk became 6.63 per cent costlier on an annual basis.

Cereals were up 4.45 per cent, while rice and wheat became dearer by 2.75 per cent and 2.15 per cent, respectively.

Meanwhile, inflation of non-food articles was up by 26.78 per cent year-on-year. Mineral prices were up by 12.35 per cent during the week under review, while petrol became dearer by 23.14 per cent.

Headline inflation in the country has remained above 8 per cent since February, 2010. According to the latest data, overall inflation in February this year was 8.31 per cent.

The RBI in its quarterly review on March 17 revised the March-end inflation forecast upward to 8 per cent from 7 per cent projected earlier.

The apex bank has hiked its short-term lending and borrowing rates eight times since March last year to tame the inflationary pressure.

Possible to maintain

at moderate level

March 24  :   Finance Minister Pranab Mukherjee today said it would be possible to maintain inflation at a moderate level on account of measures taken by the government.

" would be possible for us to maintain the inflation at a reasonable level, moderate level," Mukherjee said, while replying to debate on the Finance Bill in Rajya Sabha.

He further said the Centre and the states have to work collectively to remove supply bottlenecks, a move to tame inflation.

"...some of them (members) have suggested for the amendment of the relevant state laws so that the new entrants can come into the regulated market.

We have taken up with the state governments and we shall have to collectively work to see how these supply bottlenecks can be removed," he added.

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