Indian agri prices rise less than global average

In spite of the fact that agri commodity and food articles continue to be the main contributor to inflation in India, the price rise witnessed at the domestic level is much lower compared to the global price increase in April and May. Prior to April, prices of most of the commodities had been declining amid slowdown concerns.

Prices of commodities such as wheat, sugar, maize among others rose marginally in India since May, but rose in double digits internationally. In effect, the Indian consumer remains unaffected vis-a-vis the consumer outside.

“The level of price increase at the domestic level has been significantly lower compared to the global increase. This can be primarily attributed to the satisfactory agricultural output,” said Madan Sabnavis, chief economist at the NCDEX. The country’s grain output in 2008-09 is estimated at 229.85 million tonnes according to the third advance estimates, marginally lower than last year’s final estimates of 230.78 million tonnes.

In addition to the agricultural output, policy measures like export ban on wheat and non-basmati rice, trade restrictions on sugar, allowing duty free sugar import, have also ensured that domestic price do not track the global price. While most of the policy measures to contain food prices were taken last year when inflation touched double-digits, the pressure has largely eased now in commodities such as wheat and rice.

A major pressure, however, has been felt from the recent surge in sugar prices as output is estimated to have fallen by 44 per cent to 14.8 million tonnes in 2008-09 (Oct-Sept). But here again, the price increase has been lower compared to the global surge.