PM's meet on food inflation inconclusive

PM's meet on food inflation inconclusive

However, the two-hour high-power meeting was inconclusive. It was attended by Finance Minister Pranab Mukherjee, Home Minister P Chidambaram, Food and Agriculture Minister Sharad Pawar and Planning Commission Deputy Chairman Montek Singh Ahluwalia, according to sources.

The meeting went at great lengths over factors causing inflation, which is threatening  to touch 20 per cent. Indeed, food inflation is emerging as a major economic problem for the UPA government.

Latest data has shown that food inflation has risen to 18.32 per cent for the week ended December 25, largely due to rise in prices of milk and egg, as well as vegetables like onion, tomato and garlic. The seemingly inflated price tag on the vegetables was enough to bring tears from the eyes of the common man.

Onion continues to cost Rs 50-55 per kg in many parts of the country, owing to crop failures in major onion producing states such as Maharashtra that cut down supplies.
Steps taken by the government such as complete export ban and duty free import has so far failed to have any major impact on onion prices.

Tuesday’s meeting, held by the prime minister at this backdrop, reflects the growing discomfort within the government on its inability to control inflation. Interestingly, Agriculture Minister Sharad Pawar claimed on Monday that the government couldn’t do much in terms of controlling the vegetable prices.

Meanwhile, the Prime Minister is likely to hold discussions with Reserve Bank Governor D Subbarao on Wednesday on the possibility of further monetary steps to check price rise. The Prime Minister, according to sources, may meet RBI Governor to discuss price situation as part of the exercise to tame food inflation. Singh’s meeting with Subbarao comes ahead of RBI’s quarterly review of monetary policy on January 25.

The Reserve Bank has already raised the short-term key borrowing and lending rates six times in 2010 in a bid to raise cost of funds and check inflationary expectations.
Although the RBI action pushed up the lending and deposit rates of banks, the impact has not been profound in case of food inflation.