Food prices will remain high, says Survey

Significant transfer of food price inflation to the general price level may occur.

With limited availability of sugar, rice and pulses — the three key commodities that have built up inflationary pressure this financial year — in the domestic market, the Survey expects food prices to continue to remain high in 2010-11.

It added that “a significant transfer of food price inflation to the general price level might (also) occur in 2010-11, which in output terms is expected to have growth of more than eight per cent”.

The overall headline rate of Wholesale Price Index (WPI) inflation increased to 7.3 per cent in December 2009 from 1.2 per cent in March 2009. Much of this has been on account of sharp build-up in prices of primary and manufactured food items. The Reserve Bank of India pegs overall WPI inflation to further rise to 8.5 per cent by the end of March 2010.

 

Overall food inflation for the month ended December 2009 was 19.77 per cent. The WPI rate of inflation for primary foods crossed 20 per cent in November 2009 and continued to remain as high as 17.9 per cent at the end of January 2010. This is mainly because of lower output of pulses and rice, which pushed inflation levels of the commodities to 41 per cent and 21 per cent, respectively.

INFLATED WOES Primary articles are the main source of concern
% growth	‘07-08	Apr-Dec
		‘08-09	‘09-10
All Commodity	4.7	10.2	1.6
Primary (food inflation)	7.6	10.9 (7.6)	8.8 (13.3)
Fuel, power	0.9	11.3	-6.4
Mfd products	5.0	9.5	1.8

The survey recommends policy action, including imports, to build up public stocks in rice and improvement in productivity of pulses in the country on a medium-term basis to contain the rise in food prices.

In the manufactured food segment, the biggest contributor to the rapid increase in prices has been sugar, accounting for nearly 10 percentage points in the WPI inflation figure of 26.4 per cent (in December 2009) for such products.

With the opening stock of domestic white sugar estimated at an all-time low of 16 million tonnes for October 2010 and fresh production not being possible before the end of November 2010, the Survey suggests imports are urgently needed.