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Hoarding, poor monsoon drive up food inflation by 16.32%

Last Updated: Thursday, October 1, 2009 - 16:07

New Delhi: At a time when the WPI-based inflation is hovering below 1 one percent, the food inflation has surged to 16.32 percent for the week-ended September 19 mainly on account hoarding and fears of shortage due to poor monsoon, believe say.

The rate of increase in prices of food items was only 8 percent in same period last year, though general inflation ruled as high as 12 percent.

Experts pointed out that the government`s poor planning and lack of investment in farm infrastructure have led to food shortage in the country, which is been capitalised by traders.

Besides, the government has also not been taking any steps this year to contain high food prices probably because the overall inflation is below 1 percent, they added.

Inflation was at 0.83 percent for the week ended September 19, 2009.

"The rise in food prices is more due to increased profit margin by intermediaries," said senior research fellow Surabhi Mittal of economic think-tank ICRIER.

The reasons for the current price spiral is more than economics. It is not demand-supply mismatch alone, she said.

Echoing similar views, ARPL Agri Business Services Managing Director Vijay Sardana said, "The current price rise is due to hoarding and poor supply chain management. And the government, with no action plan for future, seems to be direction less to set food inflation right."

In the wholesale market, the annual rise in potato price was about by 81.18 percent during the week-ended September 19 from the year-ago period, while sugar witnessed a jump of 44.47 percent, according to government data.

Similarly, vegetables rates soared by 49.44 percent and pulses by 20.05 percent in the review period.

Food prices were high in retail markets, where potato was
ruling in the range of Rs 20-35 a kg and sugar at Rs 35 a kg.

The rise in food prices mainly stems from fears of
foodgrain shortage as the monsoon has played truant this yes
with almost half of the country facing drought.

Mittal added, "The government has not been able to
control the rise in food prices, probably because it has not
found the reason for the price rise."

Last year when the core inflation had touched its high of
13 percent, the government took several measures like banning
futures trading and export of different commodities, experts
said, adding import was also encouraged by removing customs
duty to step up supplies.

"The government has exhausted all its options to contain
food inflation," Sardana noted.

Bureau Report

First Published: Thursday, October 1, 2009 - 16:07

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