G. Chandrashekhar

Mumbai, Feb. 27

While Economic Survey has been guarded in its outlook that inflation rates are likely to remain within tolerance limits, prices of essential food commodities, especially wheat and pulses, have risen to levels that bring little comfort to consumers.

Chronic demand-supply imbalance in pulses continues. The country is the largest producer, consumer and importer of pulses. Between 10 and 15 per cent of domestic consumption requirement is imported.

Yet, insofar as pulses are concerned, the survey candidly admits that prices have been under stress in recent months, particularly for gram, urad and moong.

According to the second advance estimate released by the Ministry of Agriculture last week, total pulses production in 2005-06 would be 14.4 million tonnes, up from 13.4 mt last year.

On wheat, the survey suggests that retail prices remained steady during 2005-06 (up to December 2005), except some hardening in May-June 2005 across various centres in the country. But wheat prices had remained stubbornly firm since June last year on the back of lower procurement and tightening supplies.

In December/January, wheat prices crossed the psychological mark of Rs 1,000 a quintal and recorded a new high, more than a third higher than the procurement price of Rs 640 a quintal. No wonder, the Union Government has ordered import of 5 lakh tonnes of wheat to contain galloping prices.

The survey is silent on wheat production prospects for 2005-06. However, the Agriculture Ministry has estimated the crop size to be 73 mt, a mere one mt above last year's 72 mt, but below the season's earlier estimate of 75 mt. There is a risk that the crop size may eventually turn out lower than even 73 mt because of unfriendly weather conditions (rising day temperatures) for the last several days.

The price situation is not comfortable. Clearly, too much money is chasing the two essential food commodities, wheat and pulses, both of which are in short supply.

(This article was published in the Business Line print edition dated February 28, 2006)
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