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Only The Bottle Gourd Snakes Down
Outlook India, November 23, 2009

This one forecast remains gloomy: it’s going to take a while before consumers hear some good news on the food price front. It could even take up to next Diwali, That too if the summer monsoon in 2010 is normal. Of course, this runs contrary to government assurances that double-digit food price inflation will come down by next March-April—but ground realities point to a different direction.

Hardly any vegetable—barring the humble lauki or bottle gourd and leafy vegetables like mustard—is available below Rs 20 per kg. Even fresh crops of potatoes and onions are selling at higher prices, not to talk of fruits. The scene in rural areas is only marginally different from urban centres. At the farm end, there are no expectations of a drop in farm produce prices given the rising input costs and damage due to drought and floods.

“Given the drought and liberal monetary policy with large stimulus, prices are likely to run north very soon...and agri-prices are leading the pack. Even if the weather remains normal from now on, and the resultant rabi production is good, agri-prices may still soften only marginally. But a lot will also depend upon the global prices,” warns Ashok Gulati, director (Asia) of the International Food Policy Research Institute.

While there are ample wheat stocks to keep a check on domestic prices and the next harvest in April may result in a bumper yield, the situation apropos of rice is totally different. The first advance estimate of kharif or summer-sown paddy production is 69.45 million tonnes, a drop of over 15 million tonnes compared to last year. The expected shortfall may see Indian companies importing rice when global prices are rising. Ditto for sugar.

The big worry: even if India looks to imports to bridge the gaps, there are few expectations of prices dipping. “There are a raft of factors that indicate that global commodity prices will remain high as more money chases fewer goods. How can government hope to bring down food prices in India when it is looking to import rice and sugar in this scenario,” queries Pradeep S. Mehta, secretary-general, CUTS International.

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