The Hindu Business Line : Blind controls to check inflation will hurt: PM

Even while expressing concern over rising commodity and food prices, the Prime Minister, Dr. Manmohan Singh indicated it would be undesirable to react to such a situation by “returning to an era of blind controls”.

Admitting that the economic reforms process would be adversely affected by rising food prices, he said, “Efforts to promote reforms and more open economies would be derailed in the face of persistent food shortages and rising food prices. A steep rise in food prices will make inflation control more difficult and can thereby hurt the cause of macro economic stability.” Dr Singh was speaking at Global Agro Industries Forum here.

Conceding that pressures could mount for restrictive trade practices on the back of rising inflation, Dr Singh said, “It is my belief we cannot react to such a situation by returning to an era of blind controls and by depressing agriculture’s terms of trade. That will hurt the welfare of our farmers as well as the long term growth of the economy as a whole.”

On the food supply shortage, the Prime Minister said, “We are once again faced with a situation where rising demand for foodgrains and other food items is running into supply constraints – both domestically as well as internationally. This is a phenomenon, I believe, that is not unique to India. Similar pressures are being felt across the world in many other countries.”

He also pointed towards the shift in land away from food crops in the face of rising demand for bio-fuels. “Many countries are actively promoting the development of bio-fuels. What this has done is that for the first time, there is a direct linkage between oil prices and food prices. Food markets have got interlinked to oil markets, making food policy-making extremely complex as well as uncertain,” he said.