Rising food prices could undermine inclusive growth: Survey

Press Trust of India / New Delhi July 2, 2009, 12:13 IST

High domestic food prices are still a cause for concern despite India hugely benefiting from a slump in global oil and commodity prices that pushed inflation into negative zone, the Economic Survey said today.     

"The continued food inflation, though moderating of late, could undermine inclusive growth, in particular, the effort to combat poverty," said the pre-Budget Economic Survey tabled in Parliament.     

For the week ended June 13 inflation stood at -1.14 per cent against -1.61 per cent in the previous week.     

It, however, warned that some financial investors could be at play behind sharp rise in oil prices despite build up of inventories and forecasts of lower global demand. This along with rise in commodity prices could put strain on the economy.     

Domestic food price inflation as measured by the WPI food sub-index, it said, remains much higher than overall inflation.     

Food grains, fruit and vegetables, other food articles, sugar and salt being the group which registered two digit inflation from October, 2008 onwards, it said.     

In pulses, fruit and vegetables and sugar, the high inflation was prevalent  in 2008-09 and was in sharp contrast to the negative inflation in 2007-08, it added.     

Though volatility is the norms for fruit and vegetables, it said, inflation in milk remained 7-8.5 per cent in 2008-09. 

Spices and condiments recorded inflation of over 10 per cent during the year while in common salt it was 14 per cent.     

Edible oil, which recorded 11-15 per cent inflation in 2007-08, surged by 15 per cent in the first two quarters of 2008-09 and decelerated to minus 5 per cent in the last quarter.     

In the first half of 2008-09, the Survey said the inflationary pressure was on account of the momentum in the international commodity prices and the domestic prices of food items like cereals and pulses.     

The government, it said, has been alert and responsive to the situation as it unfolded and took the required administrative and fiscal measures in tandem with the monetary policy initiatives of the RBI, which bore fruits.     

Domestic inflation rate has been lower than global rate. Global inflation in food was 66 to -26 per cent, in Wholesale Price Index it was 8-10 per cent, it noted.     

Acknowledging that agricultural imports by India are limited, the Survey said, the constraints in the global agricultural production might exacerbate the supply side concerns in country.     

There is need to address these concerns, particularly in the medium term through productivity gains and efficient supply management, it suggested.