Indian sugar mills association

Food inflation likely to remai

Date:	28 Oct 2011

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News ID:	628

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Food prices may not come down substantially from current levels but neither would they shoot up sharply from here, said KV Thomas, minister of state (independent charge) for consumer affairs, food and public distribution

Thomas outlook comes close on the heels of Reserve Bank of India raising key policy rates by quarter of a percentage point each to curb demand side inflation and food price inflation having risen to double digits for the first time in a month-and-a-half during the week ended October 8.

"My experience over the past one year is that inflation in 15 essential food items, except for a few pulses and edible oils, has remained steady. Other than these, prices of paddy, wheat and sugar and other items have been stable. This is one of the reasons for my optimism that food prices will stabilise over the next few months," said Thomas.

Inflation has spread from food items to manufactured products, which constitute over 65% of the total wholesale price index. RBI on Tuesday raised the repo rate, at which it lends to banks, by 0.25% to 8.5% at its mid-term policy review. The RBI expected inflation to taper by December and chances of another rate hike being "relatively low."

Thomas said food prices had shot up mainly because of a consistent rise in minimum support prices and also because of an increase in petroleum product prices, which raises transport costs.

"On the one hand, we say farmers must benefit and so give them cheap water supply, cheap electricity, higher MSP.....In Kerala, for example, we say farmers must be given higher prices for coconut, copra and natural rubber-....then we grumble about high coconut oil and tyre prices. How can these be controlled? ," countered Thomas in response to a query whether consumers would get respite from high food item prices. The Cabinet Committee on Economic Affairs on Tuesday raised the price of wheat by Rs 165 a quintal (100 kgs) from a year ago to Rs.1285.

Prices of chana and masur were upped by Rs 700 and Rs 550 each per quintal to Rs 2800 each. Similarly, said Thomas, paddy MSP was increased last month.

Madan Sabnavis, chief economist of rating agency Care, earlier said large scale procurement of foodgrains by government for subsidized supply to low income families reduces their availability in the local market and makes them dearer for the middle class. Also, despite non-procurement of pulses a constant rising of benchmark prices makes them costlier.

The government procures around 30% of total foodgrain production each year for distribution through ration shops.

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