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Wednesday, June 19, 2024

Prices of food items have become a headache for RBI, how will inflation be reduced?


The country's inflation rate may be coming down, but the high prices of food items are a headache for the Reserve Bank of India (RBI). RBI Governor Shaktikanta Das himself has said this. So is his statement about inflation, 'The elephant has gone to the jungle, it can return someday', proving to be correct?

While the high prices of basic items like potatoes, onions and tomatoes to edible oil and pulses are robbing the common man's pocket, they are also a cause of tension for the Reserve Bank of India (RBI). Even Governor Shaktikanta Das says that the prices of food items are spoiling all his efforts to reduce inflation.

In a conference of a media group, the RBI governor said that the efforts to bring down inflation are facing a major setback due to food inflation. It is stubbornly staying high. The main reason for this is the disruption in the supply of food items due to seasonal conditions.

Governor Shaktikanta Das did not stop here, he further said that the prices of food items are constantly high and there is a lot of uncertainty in this segment going forward. The average food inflation rate has remained above 8 percent for the last 7 months. Whereas in the meantime, the country's retail inflation rate has come down to between 3 to 5 percent.

Statistics also confirm this

Food inflation figures also confirm Governor Shaktikanta Das' statement. In May 2024, the food price index based food inflation was 8.69 percent. Whereas in April it was 8.70%, in March 8.52%, in February 8.66% and in January 8.30%. In December 2023, food inflation reached 9.53%.

Has the elephant of 'inflation' returned from the jungle?

When RBI presented the monetary policy for April, it said about inflation that 'the elephant has returned to the jungle, it should stay there'. Whereas from their recent statement it seems as if the elephant of inflation has returned from the jungle to the city again. Why did they say so then? If you want to understand the RBI governor's point, then you will have to look at the inflation figures of 2 years.

After Covid, inflation started increasing in the country at the end of 2021, which kept increasing continuously. In April 2022, it reached close to 7 percent and by October it reached around 7.5 percent. After this, it started declining, but in August 2023, it once again crossed the 7 percent level. At present also, the inflation rate of the country has come down below the level of 5 percent, but has not come on the RBI's mandate of 4 percent. In May 2024 also, it remained at 4.75 percent.

Meanwhile, the food inflation rate is continuously rising, which is not allowing inflation to come down despite RBI's best efforts. At the same time, there is an atmosphere of uncertainty about the future, due to which it seems that the elephant is coming back from the jungle to the city.

What are the options to bring down food inflation?

Now what are the options to send this elephant of inflation back to the jungle? How can the government reduce the prices of food items further? The easiest way to do this is that the government should ban the export of essential food items to bring down their prices and if needed, import them as well. Like the government has already done to control the prices of onion.

Apart from this, the grains and other buffer stocks kept in government warehouses should be released from time to time so that intervention can be made regarding the prices in the market. Not only this, the government also needs to speed up its investigation under the Essential Commodities Act, stop hoarding by traders and conduct raids. At the same time, the government can also focus on increasing the mobile supply of essential goods through NAFED and other government institutions.

Not only this, the government has planned to sell pulses, flour and rice at affordable prices under the brand name 'Bharat'. This can be expanded and made available in more and more markets. This will help in breaking the price in the market. Efforts to deal with seasonal conditions must continue in the long term.


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