Taming prices a success story for Modi government

Source: economic Times

When the NDA government assumed office last year, it was confronted with the challenge of taming raging price rise. Food inflation was touching double digits.

The government took up the challenge head on and unveiled steps to check price rise. It got states on board for a crackdown on hoarders and steps to improve supplies. It set up a Rs 500-crore price stabilization fund to support market interventions for price control of perishable agri-horticultural commodities. Various government wiings were activated to calm prices.

Sliding global crude oil prices made the task easier. Experts acknowledged the sharp moderation in retail and wholesale price inflation was largely because of the impact of dipping crude oil prices.

The moderation in retail and wholesale price inflations prodded RBI to cut interest rates, the government banking on the sharp interest rate reduction to jump start the investment cycle. Commercial banks began reducing lending rates, a move expected to revive demand for loans.

While the price situation remains comfortable for now, the forecast of below -normal monsoon added an element of risk in the inflation trajectory. The government will now have to work on the next frontier in the fight against prices — improving the supply chain, revamping the farm sector, encouraging farmers to diversify into other crops, shoring up irrigation across the country. Dependence on the weather gods must be minimized to shield Asia’s third-largest economy from the mood swings of the Southwest Monsoon.

Experts talk of the need to scrap the Agriculture Produce Marketing Committee Act to trigger formation of agricultural markets and allow farmers deal directly with private buyers and eliminate multiple layers of middlemen.

There’s a need to involve states to ensure they act on revamping the farm sector and create conditions for tillers to link with private buyers so that the goal of a National Agriculture Market is realised.

Reforming the state-run Food Corporation of India and living up to its campaign promise of unbundling its operations into procurement, storage and distribution to improve efficiency has emerged as a key agenda. A panel has submitted its report on this and the government needs to plot the strategy to undertake this crucial reform.

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