The Inter-Ministerial Group (IMG) on inflation has decided to devise a strategy to keep the inflation levels within a “reasonable range”, its Chairman, Dr Kaushik Basu, has said.

“We want to narrow the price gap between farm gate and retail level. We want to nail it (inflation) and bring it down sharply. The IMG will devise a strategy on how do we keep inflation (overall) within a reasonable range”, Dr Basu, who is also the Chief Economic Advisor to the Finance Ministry, told reporters after the second meeting of the IMG here on Monday.

Today's IMG meeting focused on food article inflation, which has been driving overall inflation. The IMG held discussions on the need to revise the APMC Act and encourage competition among traders and also promote efficiency in retailing.

In his opening remarks, Dr Basu stressed that there are certain natural rises and falls of price which are the market's way of signalling information to consumers. Dr Basu said that it is not a good idea to flatten out these natural price movements. CEA said that it is when a small shortfall in production results in a disproportionate rise in prices that we realise that there may be flaws in our marketing system. He said that it is these flaws that we need to correct. The aim of IMG is to move away from reacting to each and every crisis to making structural improvements in the system of food production and delivery, Dr Basu added.

The IMG was set-up at the suggestion of the Prime Minister on February 2, 2011 in order “to review the inflation situation and suggest corrective measures.” The IMG has been entrusted with the task of studying and proposing policies pertaining to (a) food article inflation and (b) macro-economic demand management.

At today's meeting, a presentation on “debottlenecking the food value chain: An Indian retail practitioner's view” was made by Mr Kishore Biyani, Chairman, Future Group. Mr Biyani deliberated on issues related to physical supply chain, information supply chain and knowledge supply chain.

Mr S. Nagarajan, Managing Director, Mother Dairy, emphasised the importance of developing grading and standards, instant supply of information and plough back of the remunerative prices to farmers.

> krsrivats@thehindu.co.in