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Food prices to stay high in short term
Published on 19 Dec. 2009 11:24 PM IST
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Food prices are not going to come down anytime soon as the government expects the supply-side constraints to continue in the short-term due to a drop in summer farm output on account of poor monsoon and floods in some parts of the country, the finance ministry said in its mid-term review but hoped to stem spiralling prices through imports. But lessening some of the gravity of the situation, the review pointed out that inflation is appearing higher than what it is because of the base effect. “The decline in the base is giving some boost to current inflation figure. This, coupled with the rise in price, which is indeed taking place, makes the inflation appear somewhat larger than it is.’’ In an indirect pat for the UPA government’s various poverty alleviation programmes, the review said these plans have raised the purchasing power and resulted in increased demand for various food items. Programmes such as Sehri Rozgar Yojana and Antyodaya Scheme were launched with the aim of benefiting those below poverty line. Besides, welfare schemes such as NREGA too have put money in people’s pockets in rural areas. Food prices hit a 10-year-high at nearly 20% in the week ended December 5 as supply shortages bit hard. Rising food prices have contributed to a faster-than-expected 4.78% increase in the wholesale price index in November. “The rise in prices of primary articles of consumption of the common man that has been occurring in the recent times is indeed a cause of concern, and this needs to be attended to on an urgent basis,’’ the review said. After Thursday’s food inflation data, a worried finance minister Pranab Mukherjee had said the government will import foodgrains to quell prices. Though the review said the government can augment supply through imports, it expressed doubt that this option may not be available for certain commodities such as pulses, available only in limited quantities in the international market. “Moreover, there is always the risk that these imports will not materialise at the time of our greatest need.’’ Commerce minister Anand Sharma had earlier this week said rice stocks were comfortable after “record collection in Punjab and Haryana and better-than-expected performance in UP’’. The review, however, said the kharif output may be some 27 million tonnes less than 117 million tonnes in the year-ago season due to poor farming performance in several states such as Tamil Nadu etc. The Standing Committee on Finance had on Thursday pulled up the finance ministry for its failure to take timely action to tame inflation and asked the government to take immediate steps to provide relief to the common man. It also suggested amending the Essential Commodities Act to check hoarding and speculation. “The ministry of finance...has obviously failed to intervene timely and squarely address this burning issue (price rise) with due seriousness,’’ the committee report said.

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