Need for mechanism to deal with sudden spurt in prices: FM

Worried over sudden spurt in prices of food items, Finance Minister Pranab Mukherjee today made a case for setting up a mechanism to take advance corrective measures to deal with such problems.

"... perhaps there is a case for establishing standard operation procedures for addressing both sudden and anticipated price fluctuations," he said at the first meeting of the Inter-Ministerial Group (IMG) on inflation.

Pointing out that there is pressure on inflation emanating from prices of food and oil, Mukherjee said, "The risk of it spilling into the core sector requires constant monitoring, timely and proactive response".

The Minister also underlined the need to review the present system of monitoring wholesale and retail prices of the essential commodities.
"There is a need to improve the manner in which the available information is put to use in designing and formulating the required policy responses," Mukherjee said.

The IMG, headed by Chief Economic Adviser in the Finance Ministry Kaushik Basu, was formed by the government to suggest an institutional mechanism to read "warning signals" with regard to agricultural production.

The IMG was set up in the wake of stubbornly high inflation rate of 8%, that the country is battling currently. The overall inflation has remained above the comfort zone of 5-6% for over a year now.

Also food inflation, which soared to 18% in December, has gradually cooled to 13.07% towards the end of January. The IMG meeting today was attended by RBI Deputy Governor Subir Gokarn, DEA Secretary R Gopalan, Chief Statistician TCA Anant, besides Secretaries of Consumer Affairs, Food and Public Distribution, Agriculture and Cooperation, Animal Husbandry, Dairying and Fisheries.

The meeting, according to a Finance Ministry statement, also stressed on the need to move away from reacting to every episode of inflation and price spike with immediate policy responses.

The efforts, it added, should be to study flaws in the system and to take advance corrective measures so that such spikes do not occur in the future.
Issues like link between futures market and price rise, market margins, agricultural productivity and the role of state governments and district administration in price management also figured during the meeting.