The Hindu Business Line : Relax import duty on food items: Assocham

Assocham study: Mr Venugopal N. Dhoot, (right), President, Assocham, and Mr. D.S. Rawat, Secretary General, at a press conference in Mumbai on Sunday, to release the chamber’s study on ‘Current inflation in India’. (Report on Page 3) –

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Mumbai, May 18 The high rate of inflation is primarily due to high international crude prices, rise in farm prices, forex inflows and stagnation in India’s total foodgrains production, the Associated Chambers of Commerce and Industry of India said here on Sunday.

Releasing a study ‘Current Inflation in India,’ the Assocham President, Mr Venugopal N. Dhoot, and the Secretary General, Mr D.S. Rawat, said in 2007, the food price index calculated by the Food and Agriculture Organisation rose by nearly 40 per cent, compared with 9 per cent the year before. Rice had increased by 227 per cent, wheat by 293 per cent, rapeseed oil by 129 per cent and rapeseed by 130 per cent.

The study recommends that the Government continue with the import duty relaxation on various food items, so that supply flow is maintained; temporarily place a limit, rather than a ban on exports on some critical items that are in shortage and opt for a dual pricing policy by having a flexible procurement price, rather than procuring the essential commodities at MSP (minimum support price).

Mr Dhoot, while appreciating the RBI’s move to increase bank rates, said it should critically think of bridling M3, or take policy initiatives that encourage more imports and discourage exports. This short-term measure can have immense potential to rein in the price rise, as has been exhibited by the previous year’s experience.

The most critical demand-side factor is the population, which is growing on an average of 1.9 per cent annually, whereas growth rate of foodgrains production had decelerated to 1.2 per cent during 1990-2007, he said.

Failure

Mr Dhoot said the Government’s failure to fulfil the stipulated buffer stock to meet the triple objectives of feeding a growing population (food security), to release foodgrains for supply through PDS, and to intervene in the open market to moderate prices have definitely reflected in the excess demand in the economy. The fixing of procurement prices at MSP levels and lack of dual pricing policies have led to lower procurement of wheat, because market prices have remained much higher than procurement prices.

For the long-term, there was a need to invest more in rural infrastructure, and promote more public investment in agriculture, he said.

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