Mid-year review for urgent action to deal with high prices

A mid-year review of the economy by the government today stressed the need for urgent action to contain the rising prices of food articles, hitting the common man hard.

"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," said the review, tabled by Finance Minister Pranab Mukherjee in Parliament.

Recent data released by the government showed food inflation nearing 20 per cent, the highest in a decade.

Attributing the high inflation to mainly the supply side constraints, the review said increased purchasing power and the poverty alleviation programme have raised the demand for various goods.

The dominant cause, it said, is the expectation of reduction in food production over the next month due to drought and poor rains in different parts of the country.
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The review said that the government can augment supply through imports but this option may not be available for certain commodities like pulses, which are available only in limited quantity in the international market.

"Moreover, there is always the risk that these imports will not materialise at the time of our greatest need," it said, adding the solution lies in encouraging food production and increasing domestic availability.

The review also pointed out that the inflation is looking larger 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."

The Standing Committee on Finance yesterday 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," it said in its report on inflation.

Finance Minister Pranab Mukherjee has said the government will import essential commodities to improve supplies.

"Food prices are going up and this is an area of concern ... We have to take appropriate measures to see what best could be done by augmenting the supply through imports," he had said yesterday.