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Rangarajan asks govt to release more food stocks to ease prices

10:57 PM Jun 01, 2019 | Free Press Journal Correspondant

PMEAC Chairman says with manufacturing goods inflation moderating in January, there was a need to focus on supply side easing of food articles.

Mumbai:  The sharp fall in wholesale price index-based (WPI) inflation to a three-year low will give policymakers something to cheer about but persistently high retail inflation continues to remain a cause of worry.

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Inflation in food articles category, which have a 14.3% share in the WPI basket, rose to 11.88 % in January, from 11.16 % in December.  Onion price increased by 111.52 percent in January year-on-year. Potato became costlier by 79.07 percent. Overall vegetables prices increased by 28.45 percent year-on-year.

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Retail inflation stood at 10.79 % in January mainly on account of higher prices of vegetables, edible oil, cereals and protein-based items.

Prime Minister’s Economic Advisory Council (PMEAC) Chairman C Rangarajan said with the moderation in manufacture or core inflation in January, there was a need to focus on supply side easing of food articles.

“Retail inflation is still high. The WPI inflation in primary and food articles are at higher levels. Efforts should be made to release larger stocks of food articles in the market,” Rangarajan said. He said inflation would further decline to 6.5 % by March end.

As per official data, inflation in manufactured items category fell 4.81 % in January from a year earlier, compared with an annual rise 5.04 % in December.

Fuel prices rose 7.06 % in January, compared to 9.38 % in December. A likely increase in prices of diesel and petrol will reflect in February inflation number, which will be available next month.

“The rise in food inflation calls for urgent measures to address supply side bottlenecks by delisting perishables from Agricultural Produce Marketing Act and augmenting investment in agri-infrastructure which would improve the productivity of agriculture and lead to a further decline in inflation,” Chandrajit Banerjee, director general, Confederation of Indian Industry (CII). RBI is scheduled to come out with mid-quarter policy review on March 19.

Planning Commission Deputy Chairman Montek Singh Ahluwalia said that  inflation is still above the comfort level and it should come down further.

Easing of inflation would provide much needed space to the Reserve Bank to lower policy rates going ahead. RBI had projected March end inflation to be 6.8 %.

Although it is still above RBI’s comfort zone of 5-6 %, the declining in the January inflation and subdued growth in industrial output could prompt a rate cut going forward.

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