With kharif (summer crop) output being projected to drop by 10 per cent this year, food prices will remain under pressure for some time, Prime Minister's Economic Advisory Council Chairman C Rangarajan has said.
He said monsoon turned out to better during the end of the season and the kharif output is not expected to be as bad as it was in 2009-10 when production had fallen to 104 million tonnes.
"But food prices will remain under pressure for sometime and better utilisation of stocks (foodgrains) will be an anchor for controlling inflation," said Rangarajan.
Prices of food items have gone up on concerns of fall in production due to deficit monsoon, he said.
Last month, food inflation was near the double digit figure. With the recent hike in diesel prices, it may further increase.
The foodgrains production in the kharif season of this year is pegged at 117.19 million tonne against 129.94 million tonnes last year. Rice output, the main Kharif crop is projected at nearly 86 million tonne, as per the first Advance Estimates of the Agriculture Ministry.
Kharif sowing, started in June, is almost complete and harvest will start from early next month.
D K Joshi, Chief Economist at rating agency CRISIL said, "The fall in kharif ouput was expected because of poor rains. Yes, it will create some pressure on food inflation."
However, he said that there will not be a panic situation as crop prospects in the rabi (winter) season is expected to be bright as revival of monsoon has improved soil moisture.
Asked about farm export policy, Joshi said the government should continue exports of food items where the country has surplus such as rice and wheat. He further said offloading of wheat and rice would not help as inflation is primarily in pulses, edible oils and other cereals.
Pulses production is projected to drop to about five million tonnes from 6.16 million tonnes, while coarse cereals output is estimated to fall to a little over 26 million tones from 32.26 million tonnes.
Cotton production is seen at over 32 million bales (of 170 kg each) from 35.2 million bales. Sugarcane output is estimated to the same as at last year's.
Deficiency of monsoon, the lifeline to India's farm sector, stands at 5 per cent so far. Karnataka, Maharashtra, Gujarat and Rajasthan have declared drought in over 390 taluks.
The Agriculture Ministry is likely to be released early estimates on Monday.