As the Opposition and the government slug it out over rising prices of food commodities, the Economic Survey for 2009-2010 on Thursday slammed the government for its inept food management fearing that if not controlled, high prices of food could spill over to other sectors as well.
Calling for a thorough revision of inflation numbers and a new nomenclature for the same, the Survey said that disconnect between food inflation and inflation in other sectors is unusual in the country?s history.
It also called for a review of the government?s foodgrain procurement, release and buffer stocks norms, saying that some rethinking of the strategy of procurement and release is needed.
?The skewedness of inflation?with some sectors facing huge inflation, some no inflation and some deflation?is rather rare in the country?s history. The current inflation is of a different kind. It stands out for its lopsidedness across sectors. In 2009-10 (April-November), food inflation was 12.6% and nonfood inflation minus 0.4%.
If we look at India?s inflation history from 1971, this kind of inflation, where food inflation is above 10% and non-food inflation is negative, has happened only twice before- in 1992-93 and 1996-97,? the Survey said, adding that the need for creating some new terminology and concepts to differentiate between different kinds of inflation, for different policy prescription. It also pointed out that retail prices are rising 10 times faster than wholesale prices.
Questioning the government?s policy of releasing massive quantities of food grains to tame surging prices, the Survey said, ?Commitment to holding certain minimal amounts of grain is the same as not holding them because of traders and speculators cease to worry about the dampening effect that the stocks could have on prices.
FCI needs to make it amply clear that there are situations where it will offload all stocks, if need be and violate the buffer norms. ?An inviolable buffer norm is indistinguishable from no buffer norm,? the Survey said. The Survey?s prognosis on the procurement is against claims that good stocks along with their timely release warded off a possible explosive situation in food sector.
It also advocated releasing foodgrain in small quantities and batches to traders or directly to retailers instead of the current practice of open market sale.
?There is need now to put together a kind of standard operating procedure for the kind of actions the state needs to take in the event of skewed price rise,? the Survey said.
It also favoured distributing subsidies directly to households instead of giving it to the PDS store-keeper.
?Food will be available on the open market and poor people will get a monthly ration of coupons which they can take anywhere and buy food,? the Survey said.