The monsoon rains, which have been deficient by about 21 per cent this season, are likely to spur prices of food and non-food articles, economic think tank CMIE has said.
“We expect the South-West monsoon to remain deficient and the major crop production to decline by 2.3 per cent. This decline in output of major crops is expected to add to the already high inflation seen in food articles,” the Centre for Monitoring Indian Economy (CMIE) has said in its monthly report.
The inflation is likely to go up in food articles like cereals, pulses, oilseeds and vegetables.
“We expect the food inflation at 9.7 per cent during 2012-13, against our previous projection of 9.1 per cent,” it said.
During the June-August period, the rainfall was deficient by 21 per cent.
Major states that grow kharif crops like Gujarat, Rajasthan, Karnataka, parts of Maharashtra, west Uttar Pradesh received deficient rainfall even in July leading to decline in acreage of major crops by 10 per cent, it said.
Meanwhile, international commodity prices are expected to rise on account of the drought-like situation in the U.S. and combined with the depreciating rupee, imports are likely to push up domestic food inflation.
It further said, the non-food inflation is also expected to go up on account of rising prices of oilseeds, it said.
Inflation in coal and electricity index is likely to remain high in 2012-13, it said.
Keywords: food inflation, non-food inflation, monsoon failure
It is real sad that the bad monsoon will cause rise in prices of
agricultural produce, but i am not sure how the prices of the goods
and services not related to agriculture will rise.Also the national
rural employment guarantee scheme has distorted the labor force from
agricultural produce there by causing the reduction in the total
agricultural produce of the country.The defintion of inflation by the
CMIE is wrong.Prices do not inflate they adjust because of the changes
in supply and demand of goods and services.Prices can also rise
because of the supply and demand on the other side of the transaction
(i.e, money). If there is too much money supply then the demand for
the rupees will go down and hence the people have spend more monetary
units to buy the same goods and services since the rupee lost its
purchasing power.
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