Govt to watch commodities spiking inflation

Rising prices, slow industrial output and sluggish economic growth have compounded government’s worries in an election year and the finance ministry has geared up to strike at the root of all troubles, namely inflation.

The ministry is planning to keep a close watch on prices of over a dozen of commodities including food items that have kept the prices up in the past months despite high agricultural production.

The wholesale price inflation rose for the fourth consecutive month in September to reach 6.46 per cent and retail inflation too came close to double digit exerting pressure on the government to enhance supply side measures.

“The government is working on measures to enhance supply response and there is going to be a tight vigil on commodities that are contributing to price rise,” a senior ministry official said.

Prices of food articles such as cereals, rice, wheat, protein items like egg, meat, fish and milk  have been rising in the past months. The price risks also persist as adjustments in domestic prices of subsidised fuel and other imported items following a sharp depreciation of the rupee are still incomplete.

A 10 per cent depreciation in the rupee against the dollar this year has translated into higher import costs for items such as transport fuel, fertilizer, pulses and edible oil in rupee terms.
India crude import is 80 per cent of its total consumption. Besides, it also imports close to 3 million tonne of pulses and substantial quantity of edible oil and fertilisers.

After a better than expected trade data for August, the government was hoping for an early recovery in the economy but below expectation figures on industrial production and higher than expected wholesale and retail inflation have dashed hopes of an early recovery.

Cyclone in Odisha and coastal Andhra Pradesh and a consequent damage of crops is expected to keep pressure up on commodity prices. Sesame and soyabean crops in Andhra Pradesh have taken a major hit due to natural calamities. Around 30 to 40 per cent of  country’s vegetable production has also been hit due to rains in Bihar, Odisha, Andhra Pradesh, West Bengal, Maharashtra and Karnataka.

Among other imported commodities, the government has already tightened the noose on gold imports resulting into a drastic reduction in the inward shipment of the commodity. But high crude prices has kept the diesel price inflation upward of 20 in the past six months.