‘Food inflation will go back to 7-8 per cent by March-april’

KOLKATA — Food inflation, negative right now, is expected to go back to 7-8 per cent by March-april because of the "structural problem" which persists in the agriculture sector coupled with changes in the consumption pattern across all economic classes, Principal Adviser to Planning Commission Pronab Sen said yesterday.

“Food inflation in India is in negative term. By March-april it is going back to 7-8 per cent. The principal reason is the outcome of our economic growth. But changes in consumption patterns have occurred not only in the country but also across all the economic classes,” Sen said at a programme organised by the Bharat Chamber of Commerce (BCC) here.

“Real problem (for inflation) is not the production. The real problem is that consumption of fruit and vegetables and animal husbandry has gone up faster than ever before in rural areas,” he said.

Food inflation remained at the negative zone at minus 2.9 per cent for the week ended December 31, 2011.

“At the moment what you have is the base effect (for negative food inflation) and the unnatural base effect that took place last year. Every year during winter, vegetable prices come down. Last year they went up. This year they come down,” he stated.

Sen said a main reason for the high food inflation regime in the country was because of structural problems in agriculture.

“Self consumption by agricultural households is the in- creasing. So you are not getting surplus coming to the food and vegetable markets… that is the structural problem. It is a supply side issue,” he said.

Stating that the supply side issue has at least two dimensions, Sen said: “One is the production dimension and other is the transport and logistics dimensions. The production dimension cannot be sorted out until you have logistics problem sorted out.”

Meanwhile, Indian industrial production returned to growth in November, rising 5.9 per cent on an annual basis led by expansion in the manufacturing sector, government data showed yesterday.

The performance was stronger than analysts’ expectations and showed Indian industry bouncing back from contraction in October, when output shrank a re- vised 4.7 per cent year-on-year.

Analysts counselled, however, that the data still revealed weakness in the sector which has been hit by an aggressive cycle of interest rate rises and weak export demand caused by global economic uncertainty.

Output of capital goods such as machinery — a key indicator of investment and future production — fell again, contracting 4.6 per cent on an annual basis.

The president of industry lobby group FICCI, Harsh Mariwala, said demand for capital goods and chemicals was still weakening, even though output of consumer goods had risen sharply.

Finance Minister Pranab Mukerjee called the new figures a “good sign” and suggested they portended a stronger showing in the near future. — IANS