‘India at risk of sustained food price inflation’

February 25th, 2008 - 6:05 pm ICT by admin  

London, Feb 25 (IANS) Forward Markets Commission Chairman B.C. Khatua has warned that India urgently needs to improve agricultural productivity in order to avoid sustained food price inflation driven by rising demand, a newspaper reported Monday. “India has a deficit of oilseed, a deficit of many pulses and now a deficit of wheat - all the major staples are now getting hit by the demand-supply gap,” Khatua was quoted saying in The Financial Times.

He said increased consumption by Indians of commodities such as edible oil was forcing the country to import 40-45 percent of its needs of 12-13 million tonnes a year.

Infrastructure bottlenecks Khatua listed included the lack of rural roads and warehouses, cold storage and processing facilities to lift productivity and help reduce wastage, which he estimated at 15-20 percent of agricultural output.

India imports 2 to 3 percent of its wheat requirements to supplement the estimated 75 million tonnes produced domestically.

But a sharp disparity between international and domestic wheat prices, which are kept artificially low through high tariffs and subsidies, meant that imports played havoc with domestic prices, the Financial Times said.

The international price of wheat on the Chicago Board of Trade has more than doubled in the past year to a record high of above $10.60 a bushel for March delivery.

At the same time, India’s food grain output fell by an average 0.1 percent a year over the past five years, according to Morgan Stanley, while food imports rose 54 per cent year-on- year in the year ended September, the latest data available.

“There has been a significant deceleration in supply growth because of problems facing the farm sector,” said Chetan Ahya, a Morgan Stanley economist, in a report.

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