‘Use food stocks to dampen inflation'

Terming the current inflationary situation as ‘a matter of serious concern,' Chairman of the Prime Minister's Economic Advisory Council C. Rangarajan urged the government to use food stocks to ‘dampen inflation.' “Inflation is the worst enemy of the poor, and the stocks can be used to reach the poor through the public distribution system,'' Dr. Rangarajan said, speaking at the annual general meeting of the Bangalore Chamber of Industry and Commerce here on Friday.

Dr. Rangarajan said that although the threat of inflation had initially been confined to food articles (particularly cereals), it had now spread to manufactured products as well.

He suggested that the government also sell grains from its foodgrain stocks of 60 million tonnes (including about 25 million tonnes of rice) “at slightly below market prices to dampen inflation.”

He said monetary policy makers needed to ‘watch liquidity' to keep inflation under control. Agriculture and infrastructure were the ‘two main constraints,' he remarked.

He said the balance would be about 2 per cent of GDP, which is fairly comfortable. On the global economy, he said: “The situation today may not be as adverse as in 2008-09, but it is certainly not as rosy as it was in 2007-08.”

‘Hobson's choice'

PTI reports:

Defending the hike in oil prices as ‘inevitable', Dr. Rangarajan said it might have a one percentage point impact on inflation over a period. “The domestic prices of petroleum cannot be divorced from the way in which crude oil is behaving in the international market. This will only result in oil marketing companies incurring loss,” he said on the sidelines of the meeting.

“Decontrolling the petro price would mean the oil marketing companies will have the freedom in adjusting the prices as per the crude rates,'' he said.

If it was not done, we would have to find some way to meet the under-recovery of oil marketing companies. It was a difficult decision, he said and went on to describe the decision as a ‘Hobson's choice.' “I think it is a step in the right direction,” he said.