Agriculture needs attention to control inflation: CII

New Delhi, Dec 24 (UNI) Looking at the current inflation rise which is largely attributable to the stagnating food grain production scenario, India needs to have a comprehensive strategy for inflation.

While manufacturing, services and even infrastructure are showing growth, the continued stagnation of food grain production cannot be accepted any more, an industry body CII President R Seshasayee in the statement said today.

While the present levels of inflation at 5.32 per cent, as of 22nd December 2006, are within the acceptable range set out by the Reserve Bank of India (RBI) of 5 per cent to 5.5 per cent, there needs to be a response mechanism to deal with it, particularly since inflation affects the common man in a very significant way, said the CII President.

While a moderately high inflation is usual with a rapidly growing economy, India has special considerations to be made for vast majority of its population. This becomes all the more crucial when the highest increases are registered in food products, observed the industry chamber.

The CII President went on to add that primary commodities are propelling the current inflation, where the rise in the week ending 9th December was 7.7 per cent compared to fuel, which was at 3.7 per cent and manufactured commodities, which were at 4.5 per cent.

The popular perception is that oil prices have lead to inflation, but the fact of the matter is that fuel costs have remained quite under control, said Mr Seshasayee, alluding to the 3.7 per cent fuel price inflation as on 9th December.

CII has observed that while there are no sustainable short term solutions, a short term relief could come out of imports of agriculture commodities, where the shortages are most acute.

However, for the long term, a comprehensive overhauling of the agricultural sector is most necessary, said Mr Seshasayee.

Food grain production is practically stagnating and there is an urgent need to take measures to usher in the next Green Revolution, with significant use of technology such that productivity and yield increases substantially.

The CII President went on to say that fresh investments are required in the agricultural sector to give a boost. Interventions would have to be particularly in the area of technology, crop selection, land reforms and allowing greater play of markets, said Mr Seshasayee.

And this would have to be supplemented by demand side strengthening through a quick development of the Indian processed food industry.

According to CII, unless there is a substantial increase in production, the demand supply gap is likely to only increase, since population growth itself is outstripping growth in food crop production.

The other demand pull would come from processed foods industry and therefore, production would have to meet this growing demand.

Referring to the possibility of an asset price bubble, the CII President said while there is no obvious indication of that, it is always important to keep a keen eye out for such a phenomenon.

In the case that such indications are apparent, interest rate interventions would be quite in order, since a monetary intervention would be most effective then, said Mr Seshasayee.

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