Congress-ruled states to tackle food inflation - Angel Broking

Having fared poorly in the assembly elections in Delhi, Rajasthan, Madhya Pradesh and Chhattisgarh, the ruling party is taking measures to tackle issues such as price rise and corruption. On Friday, the Congress Vice-President Rahul Gandhi prescribed policy action such as delisting fruits and vegetables from the APMC Act and strong crackdown on hoarders. To combat the rise in prices of fruits and vegetables the Congress-ruled states are seeking to do away with middlemen by removal of fruits and vegetables from the purview of their respective Agricultural Produce Markets Committee (APMC) Acts. This delisting is expected to happen in the 12 Congress-ruled states by mid January 2014.

The removal of these items is likely to benefit the farmers as they can directly sell their produce and at the same time it is likely to bring retail prices lower for endconsumers given the large mark-ups in wholesale and retail prices. The step is likely to contain manipulations in the price of these items which have contributed substantially to the overall headline inflation over the past 4-5 months.

The headline WPI inflation has picked up to 7.5% in November 2013 as compared to 7.0% in the three preceding months driven mainly on account of elevated vegetable prices. WPI food inflation touched about 20% as compared to 18.2% in October 2013 as vegetable prices continued to surge for the fifth consecutive month. Retail CPI inflation has also paced higher to 11.2% during November 2013 as against 10.2% in October 2013 as the food basket comprises almost 50% of the weightage of the entire index. Already, we are witnessing easing of unusually high prices in the case of onions for instance. If implemented in a timebound fashion, the step taken could help to bring down food prices further in these states.

Source : Equity Bulls

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