Food prices to soften after Rabi; press has an urban bias: Montek

New Delhi, Nov 4 : Stating that food inflation would cease to be a problem after the Rabi crop, Planning Commission Deputy Chairman Montek Singh Ahluwalia today admitted that there was a speculative element involved in the high food inflation.

Replying to a spate of questions on rising prices, Dr Ahluwalia said high food prices were abetting inflation, adding that food prices could be under pressure if the demand and supply situation is not managed effectively.

Dr Ahluwalia opined that containing inflationary expectations will be a major policy challenges in the current fiscal.

He went into length to explain how the choice of indices gives a different picture about food inflation. For instance, in the Wholesale Price Index (WPI), primary articles have a weight of 23 per cent and food articles have a weight of 15.40 per cent, while on the Consumer Price Index (CPI), the weight of food articles is 56 per cent.

Dr Ahluwalia felt that the weightage given to food articles on the CPI was excessive and cited NSSO data to prove his point. Even among the lowest income strata, only 60 per cent of income is spent for food consumption.

In a lighter vein, Dr Ahluwalia accussed the media for having an urban bias, adding that he would be pleased if they report that the Planning Commission has a rural bias.

He said if agriculture on an average grows by two per cent, not the case in the current fiscal, where it is expected to contract by two per cent, and the economy grows by nine per cent, then obviously there will be pressure on food prices.

Add to this, the fact that the Minimum Support Price (MSP) of wheat and rice has gone up substantially and NREGA and other social sector programmes have brought incomes in the hands of the farmers, thus improving their lot.

The picture that high growth has not percolated down below was thus a distorted view and additional incomes do prop up both inflation rate in general and food prices in particular.

Dr Ahluwalia said the severe deficit in the South West Monsoon has put pressure on prices of food articles, but with the arrival of Rabi crop, food prices will soften.

--UNI

(c) 2009 Published with permission from United News of India.
Unauthorised publication of any content from NewKerala.Com is prohibited