Food prices on the rise? Finance Minister Nirmala Sitharaman has a plan

Amid fluctuating food prices in the country, Finance Minister Nirmala Sitharaman after presenting Union Budget for FY25 said that the Prime Minister Narendra Modi-led government has a plan in place for the perishables to curb the food inflation. “There are several things which are being done for perishables — storage, irradiation. There is a scheme for MSME irradiation as well, which will help perishables last longer and reach the market even when it is not production season,” said the Finance Minister in an exclusive interaction with ToI.

Read More: Capital gains tax rejig: Finance Minister explains Modi 3.0 govt’s rationale

Rising food prices continued to be a headache for Indian consumers, with the inflation rate in the food segment nearly doubling year-on-year in June. Inflation in the food basket was 9.36 per cent in June, up from 8.69 per cent in May, according to the data of the National Statistical Office (NSO). When compared to inflation a year back, India’s food inflation nearly doubled last month, from 4.55 per cent to 9.36 per cent.

The assurance of the Finance Minister comes during tomato prices touching Rs 100 per kg in retail markets of the national capital as adverse weather conditions in various parts of the country continue to affect supplies of the essential kitchen staple. The all-India average price of tomatoes on July 20 is Rs 73.76 per kg as per the government data.

Food stales inflation?
While conveying Centre’s plan for curbing food inflation, Sitharaman stressed on the supply chain linkages. The hightened focus on supply side comes after the Economic Survey called for “re-examining” of the existing inflation-targeting framework adopted by the central bank, pitching for the exclusion of food items, prices of which are often driven by supply constraints rather than demand shocks.“Short-run monetary policy tools are meant to counteract price pressures arising out of excess aggregate demand growth. Deploying them to deal with inflation caused by supply constraints may be counterproductive,” the survey said.Read More: Is Budget about Modi’s ‘Kursi Bachao’ plan? Sitharaman clarifies the motive behind funds to Naidu & Nitish

The survey said when central banks in developing countries target headline inflation, they effectively target food prices, given their high weight. So, any spike in food prices threatens the inflation target, prompting the central bank to appeal to the government to bring down food rates.

Addtionally, the Reserve Bank of India (RBI) Governor Shaktikanta Das while speaking at ETNow Leadership Dialogues in Mumbai expressed the need to increase focus on food inflation. “The disinflationary process is facing a lot of resistance from food inflation which is stubborn and high, primarily due to supply side factors affected by weather conditions,” Das said.

India’s central bank has been targeting headline inflation at 4 per cent, with a tolerance band of 2 percentage points, which shapes its monetary policies, especially interest rates.