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Friday, March 11, 2011
INFLATION DECLINES IN 2 SUCCESSIVE WEEKS = FM SAYS CURRENT RATE UNACCEPTABLE = MORE GOVERNMENTAL MEASURES NEEDED = IIP FIGURES =
2 SUCCESSIVE WEEKS
(PLUS IIP FIGURES)
Readers can find below the INFLATION STATISTICSfor the latest two weeks hereunder.
In both the weeks, food Inflation has started declining. We can hope that this trend will continue in future too. The Finance Minister has also said that current levels of 9.5% inflation in food articles is unacceptable.
There is a strong need for Governments at centre and states to adopt more pro-active measures to combat Inflation in general and Food inflation in Particular, as food inflation affects common masses very adversely. The direct effect of this type of food inflation is that – it reduces the purchasing power of the vast majority of common masses, in respect of ALL OTHER COMMODITIES, for which demand slows down. The FMCG segment in India is already facing this impact.
In the medium term, all other segments also will come under some adverse impact, if this level of Food Inflation continues. There is no doubt that this MUST COME DOWN FURTHER significantly.
The usual short term measures are –
(i)Prevention of Hoarding
(ii)Prevention of speculation in essential Food commodities
(iii)Imports of items in shortage
(iv)Prevention of cartelization in pricing
Long term measures are of course –
(i)Improving the acreage under all commodities
(ii)Better Irrigation facilities
(iii)Better fertilizer inputs
(iv)Improving yield per acre significantly.
All these are well known measures. But, in recent past, our performance in all these areas has not been Great. The Food and Agricultural Ministries at the Centre and states must act with greater Foresight in this vital area of national development.
Readers can see the statistics and the FM’s statement below :
India's food inflation rate
declines to 9.52 per cent
New Delhi, March 10, 2011 (PTI):
ØAfter a gap of nearly three months, food inflation fell to a single digit at 9.52 per cent for the week ended February 26 on account of a decline in prices of potatoes, pulses and wheat.
ØFood inflation stood at 10.39 per cent in the previous week.
ØThe rate of price rise of food items has fallen to a single-digit figure for the first time since the week ended December 4, 2010, when it was 9.46 per cent.
ØThe latest figures are expected to give a breather to the government, which has been under increasing pressure to rein in the inflationary pressure caused by high food and crude oil prices.
ØFor the week under review, prices of wheat declined by 1.07 per cent on an annual basis, while pulses rates fell by 3.91 per cent.
ØPrices of potatoes also fell by nearly 9 per cent year-on-year. However, vegetables continued to be expensive and their prices went up by 9.23 per cent on annual basis.
ØIn particular, onion prices were up by 3.90 per cent year-on-year. Rice also became dearer by 1.16 per cent year-on-year. Egg, meat and fish became 15.38 per cent costlier.
ØMeanwhile, fruits prices rose by 18.75 per cent and milk by 8.42 per cent on an annual basis.
ØThe non-food articles category saw a price rise of 29.85 per cent during the week on an annual basis.
ØFuel and power also became 9.48 per cent more expensive, while petrol became costlier by 23.14 %.
ØIndia's food inflation rate declined to 10.39 per cent for the week ended February 19 from 11.49 per cent in the previous week due to a fall in the prices of vegetables and onions, among other things, an official statement said here today, quoting provisional data.
ØThe fall in the food inflation rate will provide some relief to the Government, which has been under attack by the Opposition for the past many months on the issue of high prices of food products.
ØThere was, however, a slight rise in the inflation rate for fuel and power to 12.56 per cent from 12.14 per cent for the previous week.
ØAccording to the data released today, the prices of vegetables were up 14.29 per cent from a year ago, fruits by 16.34 per cent, milk by 11.07 per cent, eggs, meat and fish by 14.50 per cent, cereals by 2.01 per cent and rice by 2.38 per cent.
ØHowever, the prices of onions were down 3.64 per cent, pulses by 5.02 per cent, potatoes by 12.66 per cent, and wheat by 2.06 per cent.
ØOverall, the annual rate of inflation for primary articles, which have a weight of 20.12 per cent in the WPI, with base year 2004-05, stood at 14.85 per cent for the week ended February 19 as compared to 15.77 for the previous week.
WHAT THE FM SAYS :
New Delhi, Mar 11 (PTI) Terming the current level of food inflation of 9.5 per cent as "unacceptable", Finance Minister Pranab Mukherjee today said the government has taken several steps to bring it down further especially through enhancing supply of essential commodities.
"At the beginning of last year, food inflation was 20.2 per cent, and now it is 9.5 per cent. However, this figure is equally unacceptable," Mukherjee said while replying to the discussion on the General Budget 2011-12 in Lok Sabha.
Mukherjee said the high inflationary pressure, specially in food and some non-food articles, existed in other emerging economies also.
"I am not making any plea. This is not an excuse that because there is inflation in other areas there should be inflation in India also. It is not. But the fact of the matter is inflationary pressure is visible all over the world.
ØIndustrial growth has slowed down to 3.7 % in January 2011 compared with 16.8 % expansion in the year-ago period, dragged down by poor performance of the manufacturing sector, particularly capital goods.
ØThis January growth (at 3.7%), was better than the 2.53 per cent expansion (revised upward from 1.6 per cent) witnessed in the previous month.
ØDuring April-January this fiscal, the growth in industrial output stood at 8.3 % against 9.5% during April-January 2009-10.
ØIn January, manufacturing growth plummeted to 3.3 % from 17.9 % a year ago. Capital goods sector contracted by 18.6 per cent. The sector posted a robust growth of 57.9 per cent in January 2010.
ØProduction in the consumer non-durables segment grew by 6.9 % during the month under review. It had contracted by 7 % in the same period a year ago.
ØGrowth in the mining sector also plummeted to 1.6 % from 15.3 %.
ØElectricity generation output rose 10.5 % in January compared with 5.6 % growth in the same month last year.
ØOn the whole, 14 out of 17 industry groups achieved positive growth in the first month of 2011.
The current trend is certainly encouraging in respect of Food Inflation. It is hoped that Government will take effective measures to control Inflation in coming weeks. The downward trend must continue further.
Industrial Growth has been slowing down – partly due to monetary Policy measures adopted by RBI, which instead of controlling Inflation, has been having negative impact on production.
Control of Food Inflation must be attempted by Governments through short term and long term measures – and not by the RBI through monetary policy. RBI’s policies will have wide-ranging anti-growth impact, even if it impacts on Inflation, in contrast to Governmental measures which can tackle Food Inflation through more focused measures.