Increase supply of food items to tame rising prices: Anant

Dismissing the notion that food inflation can be tamed by monetary measures, Chief Statistician T C A Anant today said that the only way to deal with the problem is to augment supplies of essential kitchen items.

"Prices of food products like onions, tomatoes, fruits and milk can be brought down only by augmenting supplies. Monetary measures like rate hikes would not be that effective," he told reporters here.

As per government data, the wholesale price-based inflation shot up to 8.43 per cent in December from 7.48 per cent in the previous month, driven by rising prices of food and fuel items.

After moderating somewhat in November, the overall inflation, measured on the basis of wholesale prices, rose in December as vegetables like onion and other protein-based items became expensive.

With inflation showing no signs of moderation, it is widely expected that RBI will raise the key policy rates during its quarterly monetary policy review on January 25.

Anant, however, said that monetary action may not be of great help in moderating prices.

Besides announcing various steps to augment food supplies, yesterday the government constituted an inter-ministerial panel to be headed by Chief Economic Advisor to the Prime Minister for dealing with skyrocketing food prices.

The government also asked the state to exempt the horticulture produce from the Agriculture Produce Markets Committee Act. Besides it has also asked the state agencies to sell food items at reasonable prices.

On fluctuation in the industrial production growth figures, Anant said, "This happen in high growth economies and this trend can be seen in the past five years."

Referring to low industrial growth of 2.7 per cent in November, he said, "This has happened because festivals like Dusshara and Diwali were in October and the beginning of November. Therefore economic activities slowed down in November."

Industrial growth plunged to 2.7 per cent in November 2010 against 11.3 per cent in the same period a year-ago.

In October 2010, the Index of Industrial Production (IIP) had expanded by 11.29 per cent.

The industrial production growth, which crossed 15 per cent in July, dipped to 6.9 per cent in August and further to 4.4 per cent in September.