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Food prices likely to stay high
NEW DELHI, AUG 22 (AGENCIES):
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Published on 22 Aug. 2009 11:09 PM IST
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While finance minister Pranab Mukherjee on Friday said the government is ready to import foodgrains to contain the impact of drought on the availability of essential commodities, food prices in the country are likely to remain high. Though the global prices of food products like rice, wheat, maize and edible oil have fallen in the last one year, the prices in India surged sharply. While the global prices were rising in the second and third quarter of 2008, India banned exports of most of the commodities to keep domestic prices under control. But between October and December, the global commodity prices fell sharply due to the global financial crisis. However, commodity prices in India did not come down. Despite WPI in the country declined year-on-year, showing a negative inflation, CPI is ruling at 10-14%. According to the government data, prices of staple food items in WPI (wholesale price index) have risen sharply, led by rice, which is up by 15.2%, vegetable by 21.8%, pulses by 15.9%, sugar by 34% and tea and coffee by 25.6%. In its global economic monitor, Nomura Global Economics said that though India has sufficient buffer stock of rice and wheat at 32.3 million tonnes and 25.3 million tonnes respectively, the prices are rising mainly due to the fact that government machineries do not move quickly enough to sell buffer stock in the open market and take action against the hoarders. According to Times report, it was stated that prices for products such as pulses, sugar, oilseeds and coarse cereals, where no such buffer stocks exists, could rise further due to hoarding. Increase in the minimum support prices (MSP) of commodities has also led to the spurt. But, government sources said that increase in MSP helped revive rural economy, which in turn has generated demand for steel, cement and other consumer items. This helped the other section of Indian economy tide over impact of the global slowdown. The fear is that when India will enter the global market to purchase foodgrains, prices worldwide will also firm up fast. This was evident in the case of sugar, whose prices in the global futures market jumped to 28-year high on the news of India’s decision to increase sugar import. Mukherjee said that government will not announce the timing of the import to ensure that prices are not jacked up artificially by the international players.

 
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