Food price hikes: Reforms needed in supply chain management, says RBI
Virendra Pandit
New Delhi: India should introduce major reforms in food supply management for increased efficiency and productivity gains, and enable “stable prices for consumers, assured supplies, and remunerative proceeds for farmers”, a research team of the Reserve Bank of India (RBI) said.
For this purpose, it said, India needs to adopt a sound policy on how to store perishables to shield the economy from repeated food price shocks.
“The vulnerability of the economy to the recurring incidence of vegetable price shocks, especially ahead of and during the monsoon, warrants major reforms in perishable supply chains covering transportation networks, warehousing, and storage technologies,” the central bank said in its monthly State of the Economy report, released on Thursday, according to the media reports.
These reforms will lead to efficiency and productivity gains and enable “stable prices for consumers, assured supplies and remunerative proceeds for farmers,” it said.
Because of the lack of adequate cold storage facilities and proper supply chains for perishable items, India often witnesses runaway food price hikes. In recent weeks, for example, prices of tomatoes soared up to 400 percent as floods in some parts and deficient rains in others left crops damaged. Because of rising food costs, the country’s retail inflation in July also jumped to a 15-month high of 7.44 percent.
Last week, a careful RBI kept the interest rates unchanged and directed banks to set aside more cash to mop up excess liquidity, while it stepped up the fight against food-driven inflation.
With some states heading for crucial elections, and the Lok Sabha polls also just nine months away by May 2024, higher prices are a sensitive issue in India where governments fell in the past after they failed to control the spiraling prices of essential items.
The RBI forecasts consumer price index (CPI) inflation to average “well above 6 percent” in the July-September quarter, as against its desired 2-6 percent target range.
Likely adverse weather events, such as El Nino, can also impact agriculture production after September, while cuts in oil production are leading to “diminishing probability of crude price pressures easing over the rest of the year,” the central bank warned. “This bodes ill for net energy importers like India,” the RBI report said.
