Double whammy for consumers

After remaining in the single digit for the last six months, food inflation breached the 10 per cent mark in the week ending October 8 and settled at 11.43 per cent in the following week.

No doubt the rise in prices of fuel has been responsible for spike in food price index, but more recently, it is also linked to the inclement crop outlook and the shift farmers make from the traditional crops to cash crops. So, inflationary trends cannot be fully attributed to petrol and high speed diesel oil prices, experts say.

Moreover, the record foodgrain production and procurement have been widely touted as being sufficient to manage domestic food demand. Yet, the country has been witnessing unprecedented rise in prices of food articles and the policy makers are being forced to rethink inflation management strategies.

Food inflation is also a result of declining production of foodgrains, pulses and oil seeds coupled with deficient storage space of the government which has spurred the supply side crisis. A tardy handling of public distribution system in the country is equally responsible for rise in prices for some.

According to Madan Sabnavis, chief economist of credit rating agency Care, large-scale procurement of foodgrains by the government for subsidised supply to low income families reduce their availability in the local market and makes them dearer for the middle class.

Last but not the least, the government’s flagship Mahatma Gandhi National Rural Employment Guarantee programme meant for taking care of rural people has contributed to escalating inflation in a big way as it has helped raise rural wages in a big way.

Although, the government and the policymakers are of the view that food inflation will come down by December, if at all it happens, it will be because of the higher base effect as the food inflation was around 20 per cent in December 2010.

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