The Centre's focus on rural development since the middle of last decade, leading to an annual spend of nearly 11 per cent of the country's GDP in the rural sector may have had a role in fuelling food inflation.
“There is no direct evidence linking the rural spend with inflation. However, my hunch is: Social security schemes, including the Mahatma Gandhi National Rural Employment Guarantee Act (MNREGA), launched in the last decade, had huge positive impact on rural demand (for food items). The rise in intake of milk, protein and other such indicators may be pointing at such developments,” Dr T.C.A. Anant, Secretary, Union Ministry of Statistics and Programme Implementation, told Business Line here on Friday.
He was responding to a query on the probable link between MNREGA and prolonged inflationary impact.
According to Dr Anant, while the inflationary pressure on food grain prices eased, the “long-term pressure on a variety food items may continue.” He, however, described his views as personal and from the point of view of an economist.
Dr Anant was in the city in connection with a meeting with the Merchants' Chamber of Commerce.
According to a ministry official, MNREGA is creating 160 million person-days of work in the rural sector. “By all means such huge job creation should have an impact on rural income, labour participation etc,” he added.
Dr Anant who is a firm believer that the inflationary pressures are a result of a economic growth led demand surge, feels that the country may have to resort to open trade regime, in the long run, to manage the rising demand for food items.
“I feel, we have to enter the global food market in a big way to manage demand,” he said.
Describing RBI's monetary measures, as a short-term measure to manage the “inflationary expectations”, he said strict fiscal management like gross reduction in subsidies including that on fuel should tame inflation, in the long run.