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    » 04/11/2008, 00.00


    Indians face record inflation as a result of runaway food prices

    The Indian government tries to keep a lid on prices without harming economic growth. Import taxes on food are scrapped and rice and pulses exports are banned, but the problem is world-wide.

    New Delhi (AsiaNews/Agencies) – Inflation has reached record levels in India as a result of rising food prices. Wholesale prices rose 7.41 per cent in the week ending 29 March over a year before, the highest rise in more than three years, the Ministry of Commerce and Industry said in New Delhi today, but the jump was even greater for food.

    The situation has put the Indian government in a quandary because it has to contain inflation to protect consumers’ purchasing power whilst at the same time favour the development of the service sector and industry.

    Experts do not expect the central bank to raise the cash reserve ratio, which has already been done five times since December 2006, for fear of its impact on development. Instead the government might control prices of steel and cement, essential for further growth.

    The central bank plans to sell 230 billion rupees (US$ 5.8 billion) of bonds and bills this week, including 90 billion rupees of securities to drain excess money from the banking system.

    Fears of inflations have prompted the government to scrap import tax on edible oils and maize as well and ban exports of (non-basmati) rice (basic staple for 65 per cent of the population) and pulses.

    But any action seems more and more difficult because the problem is increasingly world-wide. Whatever is done experts expect the price of rice and cereals to rise, partly because Asian government have favoured industrial and service sector development at the expense of agriculture.

    The impact is visible to all. In New Delhi for instance the cost of rice jumped 33 per cent (from 12 rupees or 29 US cents a kilo to 16 rupees or 39 cents) in the last two months.

    “A steep rise in food prices will make inflation control more difficult,” Prime Minister Manmohan Singh said yesterday. “In most developing countries, food prices are the kingpin of the price structure.” (PB)

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    See also

    27/07/2011 INDIA
    Inflation choking India despite more expensive borrowing
    Inflation is expected to be double-digit. Food prices are outpacing overall inflation. As economic growth cannot keep pace with rising consumer prices, the government is forced to subsidy poor households, further stoking inflation.

    13/01/2010 CHINA
    Beijing tightens borrowing, Chinese stock markets drop
    Central bank forces banks to increase reserve ratio to 16 per cent. Their ability to extend loans to businesses is curtailed. Shanghai and Hong Kong stocks lose three per cent.

    02/05/2008 INDIA
    Indian Prime Minister blames West for record inflation
    Inflation in India reaches record level: + 7.57 per cent. Singh criticises the international community for not acting in time to stop price hikes. Experts lay part of the blame on New Delhi though for paying little attention to the farm sector and favouring industry and services.

    30/05/2008 INDIA
    Economic growth slowing down as rate of inflation catches up
    Agriculture is the most affected sector with hundreds of millions of people facing hardships, who might turn against the government in next year’s elections. Experts say if the growth slows down India will not be able to reduce poverty.

    03/11/2010 INDIA
    To fight inflation, borrowing to cost more
    The Reserve Bank of India increased interest rates yesterday, the sixth time this year, in order to slow inflation, which stood at a three-year high (8.6 per cent) in September. The bank governor says rates probably will not rise further.

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