Inflation has come down due to high-base effect reasons, but news on the food prices front is not good because the crop situation remains worrisome.
Jyoti Mukul & Joel Rebello
NEW DELHI/MUMBAI: Inflation has come down largely due to high-base effect reasons, but the news on the food prices front is not good because the crop situation remains worrisome.
The third advance estimates for 2006-07, released by the government on Thursday does show an improvement in terms of foodgrains - at 211.78 million tonnes (mt), compared with 209.17 mt earlier.
But the number is 8 mt short of the 220 mt target for the year.
Pulses, which has been the cause of great angst to both the government and the people because of rising prices, offers feeble hope.
Production is estimated to be nearly half a million less than the estimated 14.5 million tonnes.
Which explains the government’s move on Thursday to import 1.5 mt.
The situation in oilseeds is the most worrisome - production estimates are 17% lower at 232.64 mt compared with 279.79 mt in 2005-06.
Expect edible oil prices to show uptick, said analysts.
“Food prices will continue to remain a concern. Inflation may have come down but prices are still rising,” said Saumitra Chaudhuri, member of PM Economic Advisory Council.
Madan Sabnavis, chief economist, National Commodity Exchange, said the shortfall will lead upward pressure on prices and force the government to address the supply-side inflation pressures.
According to Chaudhuri, prices of pulses have been rising since October 2005, which should have spurred farmers to go for more plantings but that hasn’t happened.
What makes the job difficult for the government is that food prices the world over have been on the ascend too.
“So imports would also not be cheap,” Chaudhari said.
Rajeev Kumar, director of ICRIER, is however, optimistic about the price situation simply because of new crop leads to softening of prices.
He believes inflationary pressures may ease and the Reserve Bank of India can go easy on monetary tightening.
Commodity economists are not worried about the lower than expected rabi crop for key wheat, groundnut and oilseeds crop.
The targets set by the government are not the correct comparison for the estimate crop, they said.
The estimated rabi crop production should rather be seen in comparison to the crop in the previous year (69.35 mt in 2005-06), they said.
“Taken that way, the government estimates of 73.7 mt for wheat is still impressive,” said Madan Sabnavis, chief economist, National Commodity Exchange. India harvested 69.48 mt last year.
The estimated production this year is thus better than the final figure last year.
“The wheat estimate is still good because it means that even keeping 71-72 mt aside as strategic reserves, the government can export more than a million tonnes — if they are liberal,” said V Shunmugam, chief economist at the Multi Commodity Exchange.
He doesn’t see a need for imports. Also, importing will be expensive as markets from which India can import — like Australia — are also facing a shortage.
Union minister for agriculture Sharad Pawar had said India will not hesitate to import up to 3 million tonnes if needed.
The wheat acreage has gone up from 26.4 million hectares to 28.1 million hectares this year.
“Imports have been opened since December but nothing much is happening because of problems such as costs and infrastructure bottlenecks,” he said.
The drop in production of groudnut and mustard was because of a huge shift by farmers to the more attractive BT cotton and chana and wheat, economists said.
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