Reining in inflation

INDIA’s retail inflation eased to 6.83 per cent in August from a 15-month high of 7.44 per cent in July, but food prices remain a key concern. Since last year, erratic weather conditions have hit the production of vegetables, milk and cereals. A weak monsoon in several parts of the country and rising crude prices are likely to keep up the pressure on food prices. Food inflation was up 9.94 per cent in August, after a rise of 11.51 per cent in July. Vegetable inflation eased to 26.14 per cent from 37.34 per cent. The consumers have been feeling the pinch. Ironically, the growers are not the beneficiaries of the price escalation. The middlemen continue to have a field day.

The cost of a vegetarian thali in an average household jumped 24 per cent in August as compared to a year ago. Ratings agency CRISIL attributed a huge share of the surge to high prices of tomato. The tomato crisis of July-August exemplified the inherent unfairness in the farming sector. The prices skyrocketed as weather variations led to crop damage. In north India, these touched Rs 300 per kg. In Maharashtra, the retail price was Rs 160. Today, following a glut, tomato is selling for as low as Rs 2 per kg, forcing angry farmers to dump their crop. Whether prices surge or crash, they remain the net losers.

The Reserve Bank of India Governor expects the spike in vegetable prices to ebb, but has cautioned the monetary policy committee to remain watchful of the inflation situation. A prolonged pause in policy rates is likely. As elections near, reining in inflation is high on the Centre’s agenda. It is pinning its hopes on a slew of steps, such as a ban on exporting non-basmati white rice and a 40 per cent tax on onion exports.

#Inflation #Monsoon