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Weekly food inflation may come down by 1 percent: Basu
Published on 14 Sep. 2010 1:39 AM IST
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The government’s chief economic advisor, Kaushik Basu, expects the weekly food inflation data due on Thursday would show a drop of one percent. Food inflation was 11.47 percent for the week ended Aug 28.
“The inflation situation is of some concern there is no doubt about that. There was slight increase in food inflation in the last two weeks. I am expecting the weekly food inflation, that we will get on Thursday to be slightly down from what it was earlier,” Basu told reporters on the sidelines of a seminar organised by the Bharat Chamber of Commerce.
“But in the long run inflation prospect is what we have broadly studied that it is going to be a downward trajectory. Inflation was very high last year June to November, so in a couple months the base effect to pull in a direction where inflation is going to go down.”
Food inflation during November-end 2009 was at 21 percent.
“Now when it is hovering around 10-11 percent, it is still high but way below what it was 8-9 months ago. It has moved in the right direction. Sudden steps to arrest inflation could lead to increase of unemployment,” he said. He said rationalisation of inflation has happened due to a set of policies that the government has started very carefully. “In January it was entirely food market inflation. There was no inflation in any other item and the initial steps were all in the food market. Food grain release was improved it was done in smaller packages to create better competition and that was having an affect.”
“After that when there was slight pick up in non-food items inflation and that continued for a while that begun to see actions from the Reserve Bank of India (apex Indian bank) and the ministry of finance. All these three policies on food inflation, monetory policy and management of fiscal policy helped to rationalize inflation,” he said.
Basu is hopeful food price inflation, which is fluctuating now is going to drop in the next couple of months. “I think it is going drop over the next couple of months.” Regarding food grain management Basu said, the country is good in “procurement but not so good in releasing”. He said granaries are full despite that it is not properly released. He expressed concern over the international wheat price scenario. “The international wheat situation is extremely worrying. With the Russian crop having failed, Ukraine and Kazakhstan are doing badly and the situation globally is bad. That is going to cause some speculation, which is affecting our prices.”
He further said to sell off some of the grain (wheat) would be judicious for India and this idea could be debated and discussed. Basu, however, clarified that in a country like India where the population is so high and there are many poor people resistance can come about selling grains.
In that case a “swap deal” can be reached with the international markets, so that grains could be bought back when necessary.
Asked about the monsoon conditions this year and its affect on the food grain production, he said: “The rainfall all over India is at an average, with a shortfall in northeast and eastern India.
Already some districts are declared as drought hit. So there is a worry in the northeastern front but hopefully, the average sowing seen cropwise is greater than last year.

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