New Delhi: Improved rainfall in the past week brought relief to parched India, but planting of key crops remains endangered and poor monsoon rains sent an index of food prices up 10.5% in the year through 8 August.
In its latest moves to mitigate the impact of a drought, the government raised purchase prices of rice and lentils to boost supplies and gave states permission to increase borrowing limits by $4.3 billion this year to help meet additional expenditures and stimulate demand.
A sugar trade body said that millers have contracted for imports of 4 million tonnes of raw sugar to meet demand, particularly in the festival season starting next month. High prices and fears of scarcity have led to hoarding in the world’s largest consumer of sugar.
“Higher prices are not dampening demand. Media reports have created panic among consumers. People who buy five kilos of sugar every month, they are buying 10 kg,” said Mukesh Kuvadia, secretary of the Bombay Sugar Merchants Association (BSMA).
India’s wholesale price index fell in the year to 8 August for the 10th week in a row, but drought-like conditions continued to push up food prices, with the food article index rising an annual 10.5%.
Economists expect broader inflation to rise sharply in coming months as the high base of comparison from last year’s record oil prices lapses.
However, with a drought hitting the economy and higher food prices hurting consumers, analysts said that the central bank could maintain an easy policy stance for longer than earlier thought and not raise interest rates in the fiscal year to March 2010.
Government sources on Thursday informed that the shortfall in monsoon rains narrowed by two percentage points to 27% on 18 August from a week earlier.
India still faces a drought as weak June-September monsoon rains have disrupted planting of several crops such as rice, sugarcane and oilseeds and raised food prices.
Rainfall in cane-growing northwest India was 37% below average, improving from a 43% deficit a week ago, said officials at the ministry of earth sciences, who asked not to be named.
“The shortfall in the soybean-growing region of central India widened by 3 percentage points to 22%,” the sources said.
Prime Minister Manmohan Singh said this week that India was facing the prospect of a drought, and the government is planning a crackdown on hoarding of farm commodities and imposing limits of stock traders can keep.
The government hopes to step up crop planting in the winter season to offset the expected loss in the summer-sown crop.
It is also aiming to increase purchases of grain from farmers to ensure adequate stocks with government agencies.
Home minister P. Chidambaram said that the Cabinet had approved a higher price for rice purchased by government agencies.