Good rains and inflation

Good rains and inflation

Mumbai: It’s only March, but the weathermen have already taken out their crystal balls.

Reuters reports:

“There is no abnormal global signals in the weather system to hint that there could be a drought this year," D. Sivananda Pai, director at the state-run National Climate Center, told Reuters.

Another senior official said weather models of the Indian weather office ruled out chances of occurrence of El Nino that causes drought conditions in the Indian sub-continent.

“Our statistical models do not forecast a bad monsoon for 2011," the government official said without wanting to be named.So, will that help reduce food inflation?

Remember that the second advance crop estimates of the government released in February indicating record output in case of wheat, pulses and food grains, high inflation numbers continue to haunt the nation. Click here to read details

But good harvests need not necessarily bring down food inflation.

One, as Mint’s Manas Chakravarty pointed out that the prices of milk, chicken and fish have nothing to do with the rains.

Second, a good part of the bountiful crop this year was damaged by unseasonal rains due to improper storage capacity, according to Gautam Singh, economist at Anand Rathi.

The government has recognized this problem and announced some measures such as new warehousing and cold storage projects under different schemes.

The FM also said:

It is also proposed to recognize cold chains and post-harvest storage as an infrastructure sub-sector, the FM said in his budget speech.

So far, so good. But only time will tell how soon this will be able to bring down rising food prices.