Just three days after President Pratibha Patil admitted to the “unhappy pressure” on food prices, the annual Economic Survey presented in Parliament on Thursday conceded that the already high food prices could further increase over the next few months.
Alarmingly, the Survey for 2009-2010, coming a day ahead of the budget presentation on Friday, stated the retail prices that matter to the consumer were rising ten times faster than the wholesale prices. The Survey estimates that the wholesale price index will be up 1.6 per cent in the current fiscal, but the rate of inflation based on consumer price index will be a whopping 11.4 per cent.
Already under attack in Parliament from the Opposition over the price rise issue, the Survey is an embarrassment to the ruling UPA and provides fresh ammunition to its political rivals. The Survey criticised the government’s food management policies that have led to “unacceptably” high prices of items like sugar.
For instance, it said, the “hype” over kharif crop failure without taking into account the comfortable food stocks and rabi prospects might have exacerbated inflationary expectations, encouraging hoarding that results in a higher inflation in food items.
Bullish on growth
The Survey, however, signalled that the economy was back on the high growth path. Analysing the growth prospect, it projected an impressive 8.75 per cent growth rate in the next financial year starting from April 1.
But on the side of caution, the Survey recommended a gradual rollback of the various stimulus packages the government had offered in the face of last year’s economic slowdown. It also pitched for some radical reforms to help achieve higher growth rate. The economy could breach the 9 per cent growth mark in 2011-2012, it said.
Significantly, the Survey while predicting that the Indian economy could emerge as the world's fastest-growing in four years, suggested slew of radical reforms to fuel growth momentum. It recommended to the government to decontrol prices of food, fertiliser and petroleum products saying subsidies given to these sectors have a “questionable” impact.
The high level of subsidies now constitutes a major fiscal burden and tends to crowd out the government’s ability to finance other vital activities in economy that could promote productivity and eradicate poverty, it noted with concern.
