Mismanagement of food system causing inflation: Abhijit Sen

Mismanagement of food system causing inflation: Abhijit Sen New Delhi: Attributing high inflation to mismanagement of food system, Planning Commission Member Abhijit Sen Sunday underlined the need for greater coordination between trade and other policies to deal with the situation.

"A major source of inflation has been in the case of cereals and this is where we have a clear case of mismanagement of food system. It is not production shortfall," he said in an interview.

There has been 19 percent rise in wholesale price index- (WPI) based inflation compared with last year, while the country is sitting on a huge stock.

The government does not have a long run price policy which can guarantee farmers the price for their produce, he said.

"Mismanagement of food system means the inability to have a long run price policy which says that this is what we are going to guarantee the farmers...," he said.

Sen said India has huge stocks of wheat, but government is unwilling to release it at a rate which should bring down prices because the support price was too high and it doesn't want to sell it at a rate to make a loss.

The government in December announced Rs 65 per quintal hike in the minimum support price (MSP) of wheat to Rs 1,350 per quintal.

Sen also made a case for much greater coordination between the trade policy and other policies.

"There should be much greater coordination between the trade policy and the domestic policy... The world prices are very volatile, we therefore need much greater flexibility in our tariffs. Tariffs should vary as world prices vary. In fact what we end up doing is not tariff variation but bans on export and bans on import," he said.

However, variation in tariffs require a continuous assessment and India does not have that continuous assessment, he added.

"I think the CACP (Commission for Agriculture Costs and Prices) should be playing much larger role in trying to give direction to tariff setting policy. Unfortunately, CACP's problem will be that the Finance Ministry and the Commerce Ministry ....Do not opt to listen to it (CACP)."

CACP suggests farm pricing policy.

The WPI-based inflation eased to 7.24 percent in November from 9.46 percent over the same period a year ago. However, retail inflation in the month moved up to 9.90 percent, mainly on account of higher prices of sugar, vegetables, edible oil and clothing.

PTI