New delhi, February 18: Surging food prices remain a major cause of concern for the government as the finance minister Pranab Mukherjee on Wednesday described the high inflation level as ‘disturbing’ adding that the measures already taken by the government would take some time to yield results.
Inflation surged past 8.5% during the last month—mainly driven by high food prices, but also because of broad-based price spiral. Food inflation for the week ending January 30 reached about 18%. The government would have to walk a tightrope with regard to roll back of stimulus given to the industry through reductions in excise and service tax rates to tide over slowdown.
While the reduced duty rates have burnt a hole in the government finances and reduced it’s ability to reduce the high fiscal deficit, it is feared that if the tax rates are hiked, prices could rise further and lead to more inflationary pressures.
” That is (rising inflation) a matter of concern, no doubt… I am afraid 8.5% rise in wholesale price index is disturbing,” Mukherjee said adding that the measures already taken by the government would take some time to have an impact on prices.
Mukherjee was,however, optimistic that having taken some supply side measures, inflation could be at a moderate level in some months. “I do hope that over a period of few months, it will be possible to have a moderate rate of inflation,” Mukherjee said.
The government had provided a fiscal stimulus at 3.5% of GDP during the last fiscal which grossed to Rs 1,86,000 crore while tax concessions to the industry are more than Rs 42,000 crore. This fiscal, the deficit is projected to be around 6.8% of the GDP.
The finance minister at the same time noted that the carefully designed stimulus packages by the government in wake of the economic slowdown had enabled the country to fight the crisis better than many other countries. He projected the growth rate for the country to be around 7.5% for the current fiscal and for the next financial year.
Agriculture minister Sharad Pawar on Wednesday said that good prospects of rabi crops like wheat would help in easing the price by March-end.
“There has been declining trend in the prices of essential commodities such as sugar, pulses and potatoes. The prices are expected to decline further in the next few months,” Sharad Pawar told reporters on the sidelines of a conference.
He said the crop condition of wheat and pulses was good so far and the country would harvest more wheat than last year’s record production of 80.68 mt. “Last 3-4 showers have helped the wheat crop. We will breach the last year’s record production of wheat,” the minister said.
Inflation rose to over a 13-month high—8.56% in January. Experts, however, believe it may touch 10% by this fiscal-end. The RBI has projected overall inflation to reach 8.5% by this fiscal. However, the rate or price rise already breached that estimate in January at 8.56%.
On the limited warehousing facilities with FCI, which causes huge loss of revenues, Pawar said he has instructed the corporation to use warehousing facilities owned by private players.
—-Agencies