Surge in food inflation due to high prices of certain items

As part of the Centre's efforts to get a hold on rising food inflation, Union Finance Minister Pranab Mukherjee on Friday asked the State governments to initiate swift action against hoarders to ensure that all bottlenecks in the supply chain were removed at the earliest and food prices came down quickly through improved availability of items.

In a communication to all Chief Ministers after a spurt in food inflation to 18.32 per cent for the week ended December 25, 2010, as per the WPI (wholesale price index) data released here on Thursday, Mr. Mukherjee noted that driving the current surge of food inflation were high prices of certain select items such as fruits and vegetables, milk, meat, poultry, eggs and fish, and the build-up was noticeable in the last few weeks.

The WPI data revealed that three-fourth of food inflation was due to rising prices of vegetables, especially onions, and nearly one-fourth on account of higher milk prices. During the current fiscal, although the prices of cereals and pulses sharply declined and continue to do so even in recent weeks, the trend in food inflation had reversed to a northward surge.

In his letter, Mr. Mukherjee highlighted the fact that “while there are some weather-induced supply constraints on some of the items that are currently exhibiting high inflation – and this goes against the seasonal decline in prices normally seen at this time of the year – a larger part of the price rise was due to the widening gap between wholesale and retail prices, coupled with the growing demand for these products following rising income levels.”

Worrying factor

Apparently, the fact that the increase in the retail prices of certain items are not in sync with farm gate and the wholesale prices and the margins are widening further is a major worrying factor and the Minister wants the States to have a close look at this aspect of the supply chain.

Mr. Mukherjee pointed out that from a high of nearly 21 per cent in April 2010, the year-on-year food inflation had declined to 8.60 per cent on November 20, mainly owing to the collective efforts of the Centre and the States. That trend had since reversed and food inflation was now at 18.32 per cent as of December 25.

‘Mismanaging food economy'

Charging the Manmohan Singh government with mismanagement of the food economy, the Communist Party of India (CPI) on Friday deplored its inaction in containing inflation and controlling prices, especially of food items.

Reacting to the rise in food inflation by 18.32 per cent by the end of December 2010, the party said it continued to rise since then.

“This is not merely a mismatch between demand and supply, but a mismanagement of food economy by the government,” the CPI central secretariat said in a statement.

It said that during the monsoon session of Parliament, both Houses adopted a unanimous resolution on the adverse impact of inflation on the common people and asked the government to take adequate measures to contain it.

Despite the indictment of Parliament and a warning by the Food and Agriculture Organisation, the Congress-led UPA government had completely failed to maintain price stability.

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