RBI Deputy Governor Subir Gokarn on Friday said that persistent high food inflation might become a long term phenomena. High food inflation adds to the base thereby pushing up the base level of inflation, he said. “We seem to be entering a phase where persistent high inflation could become a long-term phenomena,” Gokarn said speaking at the Institute Lecture Series of Indian Institute of Management, Calcutta here today.

The recent episodes of high food inflation are highly co-related with protein inflation, unlike that in the 60s and 70s where food inflation was primarily driven by rice, wheat and sugar.

“There has been a change in the structure of food shortages in the country. We seem to have got into a situation where food prices are being driven by a particular segment, primarily protein prices including milk, egg, fish and meat,” he said.

Higher food inflation also tends to tilt the growth-inflation balance to more on the inflation front.

“So managing inflation tends to become a challenge,” he said. Lower food inflation will improve the growth-inflation balance, he added.

Talking about food supply management, he said, the country should produce more of what the consumers look for. “We need to realign our production structure to bring more proteins into the system. But given that we do not have surplus land so we need to focus on improving productivity,” he pointed out.

Efficiency in distribution system will also help address the issue of food prices. “Investment in storage, transport and processing is important to dampen the price volatility,” he said.


(This article was published on December 7, 2012)
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