'Food supply constraints should be addressed by new govt'

Apr 15 2014, 18:50 IST
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Inflation rose to a three month high of 5.7 pct in March mainly due to spurt in prices of food items. Reuters Inflation rose to a three month high of 5.7 pct in March mainly due to spurt in prices of food items. Reuters
SummaryInflation rose to a three month high of 5.7 pct in March mainly due to spurt in prices of food items.

Tackling supply side constraints for arresting food prices should be the top most priority of the new government, India Inc today said, after inflation rose again in March after three months.

As such the slump in demand and high cost of credit are impeding investments and hampering growth, they said.

Snapping the declining trend, inflation rose to a three month high of 5.7 per cent in March mainly due to spurt in prices of food items like potato, onion and fruits.

"Unless food inflation is brought under control, we could see a lasting impact on the overall growth scenario," Ficci President Sidharth Birla said.

"The central bank must take a more nuanced stand on its reading of the growth inflation dynamics as we are fast losing ground with regard to performance of the industrial sector. Along with growth of the industrial economy, we also have on stake sufficient employment generation," he added.

The inflation in the food items, based on the wholesale price index (WPI), shot up by 9.9 per cent in March as against 8.12 per cent in the previous month.

"The revival of inflation, especially of food prices, calls for supply side initiatives to raise agriculture productivity, including augmenting investment in agri infrastructure and improving supply side management, delisting perishables from APMC and encouraging FDI in retail," CII Director General Chandrajit Banerjee said.

Urging for "swift and decisive" policy actions, Banerjee said it would be "unfortunate if the RBI decides to address supply side created inflation through demand constriction by using interest rate as a tool".

The overall WPI inflation, which was on a decline since December, had dropped to a nine-month low of 4.68 per cent in February.

"The underlying reason for hyper inflation remains that of supply side constraints. The fundamental objective of RBI policy should be to ensure that cost of finance to end user becomes competitive," Assocham President Rana Kapoor said.

In the monetary policy review earlier this month, the Reserve Bank had retained the key interest rate.

President of PHD Chamber Sharad Jaipuria said: "We expect a calibrated policy stance in the coming times from RBI in terms of repo rate cut to revive the economic growth.

He also urged the Government to take effective measures to improve and fasten the supply chain process to prevent jump in prices of various commodities, especially the food items, which causes a cascading impact on the overall WPI inflation.

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