Seth: Close watch
New Delhi, June 7: Cabinet secretary Ajit Seth today discussed with top officials the impact of a delayed monsoon on food prices and the government’s preparedness to deal with the situation.
“The cabinet secretary took a meeting of the committee of secretaries to review prices of essential commodities,” an official statement said.
The meeting, attended by the secretaries of key ministries such as commerce and industry, agriculture and finance, comes in the wake of retail inflation accelerating to a three-month high of 8.59 per cent in April mainly because of rising prices of vegetables, fruit and milk.
The RBI has recently kept the key interest rate unchanged at 8 per cent. The inflation, measured on the wholesale price index (WPI), was 5.2 per cent in April.
“A review of recent rainfall, agricultural production and inflation figures surprisingly show that El Niń often does not trigger drought in India; droughts do not lead to lower production or do not lead to inflation,” R. Sivakumar, head of fixed income at Axis Mutual Fund, said in a research report.
He said “the period from 1999 to 2004 — which saw four below-normal monsoons, including three droughts — saw a food inflation of only 4 per cent on an average. The government’s support prices are a much better indicator than rainfall of where food inflation is going. When the government ratchets up the minimum support price for crops, inflation rises. When it slows down the increases in the minimum purchase prices, inflation slows”.
The south-west monsoon has hit the Kerala coast after a delay of four days and is expected to remain “sluggish” and may proceed to central India only after June 25.
The India Meteorological Department will come out with a detailed report on the monsoon on Monday.
Even though the share of agriculture in GDP is only 14 per cent, about 52 per cent of the total workforce is employed in the farm sector.
A good harvest gives a boost to agricultural income, resulting in increased demand for industrial products and higher demand for services such as trade, transport, banking and insurance.