Abysmal supply-side mgmt led to spike in inflation: Experts

A day after the food inflation crossed the 18% mark the government has stepped up efforts to douse the inflation fire. The finance ministry has identified cartels as the key reason for high prices and has put in place a four pronged strategy to check this.

The finance minister wrote to state chief ministers today, asking them to urgently look into supply chain bottlenecks. He said food inflation is due to a gap between wholesale and retail prices, and not due to weather constraints and states need to increase supply of vegetables and milk. The income tax department too has been conducting surveys of vegetable dealers in Uttar Pradesh. Meanwhile, there was a piece of good news for consumers. External Affairs minister SM Krishna announced that Pakistan agreed to resume exports of onions to India. Krishna said that the onions will be sent across by sea and land. The finance minister also met farm sector experts today who have recommended measures such as tightening of monetary policy, futures trading and FDI in retail to check food inflation. What more can the government do to tame inflation? And will the latest moves yield the desired results? In an interview with CNBC-TV18, noted economists Suman Bery, director general of NCAER & Abheek Barua, chief economist, HDFC Bank debated on the issue. Below is a verbatim transcript of the interview. Also watch the accompanying video. Q: On the macro implications of the current price, we have seen the latest headline figures with regard to food price inflation. We know the index has been rejiged, we know that weights have been reallocated and while there is a lot of statistical explanation for what is going on, on the sort of market level at the retail end consumers are feeling the pain of a government that perhaps has failed consistently to anticipate what is going wrong? And given the limited options that any government can have in such situation, has actually not been able to act at the right time, would you agree with that contention? Bery: I actually think that