Foodgrains output to rise 5.4% on better rainfall

India, the world's second-biggest producer of wheat and rice, seeks to produce 5.4 per cent more food grains as rainfall in the growing areas improve prospects for a bigger harvest.

Output of food grains, including lentils and coarse cereals, may rise to 220 million tonne in the year ending June from 208.6 million tonne a year earlier, the government said today in the Economic Survey for the year ending March 31.

A bigger harvest will help augment local supplies of the grain, helping Prime Minister Manmohan Singh's government to damp the fastest inflation in two years. Increased production may also lower imports, cooling global wheat prices that have risen by a third in the past year on the Chicago Broad of Trade.

Chicago wheat prices reached a 10-year high in October in part because India began importing the grain in February 2006 after a six-year gap. Domestic prices rose by more than a fifth as rising demand worsened a production shortfall. The country's wheat reserve had halved to 6 million on November 1, the survey said.

While rains in September encouraged farmers in states of Madhya Pradesh, Maharashtra and Rajasthan to plant wheat early, the crop benefited from rainfall this month, the survey said. Output may exceed 72.5 million tonne, Agriculture Minister Sharad Pawar said February 20.

"With a welcome rainfall in early February, prospects of wheat and other winter crops have brightened,'' the survey said. "Area coverage under wheat has been encouraging.''

Wheat, India's biggest winter-sown grain, was planted to 28.45 million hectares (70.3 million acres), 7 per cent from a year earlier, the farm ministry said.

Still, the country may import 3 million tonne in the year starting April 1 to build stockpile, the Foreign Agricultural Service at the US embassy in New Delhi said in a report dated February 21.

State warehouses may hold 3.5 million tonne of wheat on April 1, less than the buffer stock of 4 million tonne, the report said.

"The overall wheat supply situation in general and wheat availability with the government in particular, is likely to remain tight because of low carry over stocks and likely low procurement from farmers," the report said.

Wheat demand may climb to 75.2 million tonne, 1.6 per cent more from a year earlier, the report said.

The country's inflation has climbed to a two-year high as record economic expansion boosts demand for farm and factory products. Gains in consumer prices paid by farmers are at an eight-year high of 8.94 per cent, while price increases for urban dwellers are the most in six years.

The government has in the past month reduced import duties on cooking oils, steel, aluminum, copper, cement and chemicals such as sulphur, and cut prices of auto-fuels.

Last week, the government said it will sell 365,000 tonne of wheat at below market prices to cushion consumers from rising food prices.

Singh's government wants to curb inflation ahead of polls in seven states this year. The Congress party-led coalition is set to lose in the northern states of Punjab and Uttarakhand among the three provinces that went to polls this month. The Congress may retain power in the eastern state of Manipur.

The most important contest is in Uttar Pradesh, which sends a seventh of all lawmakers to federal parliament. The elections will set the tone for general elections in two years.

"We will continue to take more steps to curb inflation," Finance Minister Palaniappan Chidambaram said in New Delhi.