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Finance minister Pranab Mukherjee attributed the rising prices to demand-supply mismatch, depreciating rupee, global commodity prices and easy monetary policy followed by some countries
New Delhi: As the opposition geared up to move a an adjournment motion on the issue of price rise, finance minister Pranab Mukherjee admitted that more needs to be done to get desired outcomes on inflation control, hoping it will come down to 6%-7% per cent by March end, reports PTI.
“...while there has been a steady improvement in the inflation situation in India, there are important tasks ahead to be undertaken to get the desired outcomes,” Mr Mukherjee said in a suo-motu statement on inflation in Lok Sabha.
He attributed the rising prices to demand-supply mismatch, depreciating rupee, global commodity prices and easy monetary policy followed by some countries.
“...the government is committed to bring down inflation to more acceptable levels. I hope to see the March end inflation between 6% and 7%,” he said and sought suggestions from the members on how to tackle the issue.
Inflation has remained over 9% since December 2010. The headline inflation measured on the basis of the wholesale price index (WPI) was 9.7% in October, while the rate of price in food segment for the week ended 5th November was 10.6%.
Mr Mukherjee’s statement was laid in the Lok Sabha amid turmoil over a variety of issues including price rise. The Left parties had announced that they will move an adjournment motion in the House today and the BJP-led NDA had promised support to it, much to discomfiture of the government.
Mr Mukherjee, however, said that during periods of rapid growth and structural change, that India is currently undergoing, inflation does tend to increase.
He said in a globalised economy, where the Indian economy is dependent on commodity imports like fuel oils, movement in international prices have a direct bearing on level of domestic inflation and its management.
The minister said as Indian currency was sliding against the dollar, “whatever little benefit could have been derived from the softening of international commodity prices, has been wiped out by the depreciation in rupee.”
Mr Mukherjee said the Reserve Bank of India (RBI) was keeping a close watch on foreign exchange markets.
“The RBI has been monitoring the foreign exchange markets closely and will take the required action in the light of international developments as the situation unfolds,” he said.
The prices are crashing due to excess Kharif supply and poor export off take; prices are expected to come down further
Excess supply and poor off-take by the exporters has taken a toll on the prices of onions. In the wholesale market of Lasalgaon, Nashik, the country’s largest onion producing area, prices are crashing down, leaving the farmers to bear the losses. Experts are cautious about the situation in anticipation of a further fall in prices.
The boost in the Kharif production and lower exports due to higher minimum export price (MEP) has resulted in the commodity being flooded in the domestic market.
“In the Lasalgaon market, the prices are between Rs500-900 per quintal while the total production is 5%-10% more compared to last year. The Kharif crop is adding to current production. Prices are further expected to fall in the month of December. Meanwhile, farmers are burdened with losses,” says RP Gupta, director, National Horticultural Research and Development Foundation.
On Monday, wholesale prices of onion in the Lasalgaon market were in the range of Rs331-Rs1,161 per quintal. Surprisingly, in Mumbai market the prices are stable between Rs800-Rs1,200 per quintal. “Prices are stable in Vashi market, with around Rs8-Rs10 per kg (retail),” says a trader from the Agriculture Product Market Committee (APMC) market at Vashi.
According to a media report, following the fall in the onion prices in Karnataka, last week farmers from staged protested at Amargol APMC and blocked the Hubli-Dharwad road.
“Everyone in the cycle—from production till the time the produce reaches the retail market—except farmers, at some point are benefitting either from the falling or rising prices. When price falls, consumers are happy, when it rises, traders cheer. But unfortunately, farmers continue with losses in both situations. There are instances where produce was thrown away by onion growers due to lower prices. But nothing is been done to address the issue and safeguard the interest of farmers who can’t even recover his production cost,” says a professor of media studies.
The government reduced the MEP to $350 per tonne from the earlier $475 per tonne, to encourage exports. Indian onion faced a dip in exports in the international market due to higher MEP.
“Higher MEP resulted in poor export offtake. Now they have reduced it, I think it should encourage exports. But still the current MEP should also be brought to around $250 per tonne,” Mr Gupta said.