Govt backup plans crucial to limiting food inflation: RBI

Moneycontrol Bureau

The RBI monetary policy document revealed a grim picture of the agriculture sector, and warned of food inflation unless the government had effective contingency plans lined up.

“Contingency plans for food management, including storage of adequate quantity of seeds and fertilisers for timely supply, crop insurance schemes, credit facilities, timely release of food stocks and the repair of disruptions in food supply chains, including through imports and de-hoarding, need to be in place to manage the impact of low production on inflation,” the RBI said in the policy document.

It also recommended that the government limit the increase in agriculture support prices, or minimum support price (MSP) at which it buys the produce from farmers.

According to RBI estimates, around 94 lakh hectares of area sown under the rabi crop have been affected by unseasonal rains and hailstorms in March.

Excerpts from the RBI document: “The third advance estimates of the Ministry of Agriculture indicate a contraction in foodgrains production by more than 5 per cent in relation to the preceding year’s level. Successive estimates have been pointing to a worsening of the situation, with the damage to crops like pulses and oilseeds – where buffer foodstocks are not available in the central pool – posing an upside risk to food inflation.

For the kharif season, the outlook is clouded by the first estimates of the India Meteorological Department (IMD), predicting that the southwest monsoon will be 7 per cent below the long period average. This has been exacerbated by the confirmation of the onset of El Nino by the Australian Bureau of Meteorology.”