SBI Report Calls For Government Intervention In Food Market

Given the prevailing inflationary pressures and the potential impact of the monsoon, the recently released research report by the State Bank of India's (SBI) Economic Research Department sheds light on the correlations between rainfall patterns, food grain production, and overall inflationary pressures. The report emphasises the significance of tomato, onion, and potato (TOP) as staples in the Indian kitchen and their contribution to overall food inflation. 

Raghvendra Nath, MD, Ladderup Wealth Management, said, “In June, India experienced a surge in retail inflation, with the Consumer Price Index (CPI) rising to 4.81 per cent, breaking a four-month trend of decline following May's rate of 4.31 per cent. The primary driver behind this inflationary spike can be attributed to an increase in food prices. Notably, the provisional figure of 4.88 per cent exceeded the market expectation of 4.60 per cent as per the Bloomberg Survey.”

The SBI report also highlights the immediate need for steps to stabilise overall food inflation. To which, Anitha Rangan, Economist at Equirus, suggested several measures that the government and policymakers can take to mitigate the increase in pulse prices and stabilise overall food inflation. Anita said, “Firstly, the government can offload its buffer in the market, particularly for rice, which is well above the requirement. Offloading the buffer stocks can help contain further price spikes. Secondly, the government should be prepared to import pulses and other essential commodities if necessary. While imports may be a costly option, they can help overcome commodity-specific shortfalls and ensure stable food supplies. Fiscal challenges may arise, but the government may need to foot the bill if necessary.”

Rangan also emphasised the need to shift agriculture patterns to more drought-prone crops such as millets. “The government should provide incentives to farmers to grow millets and strengthen its procurement policy to support these crops. This can help diversify food production and reduce dependence on water-intensive crops, thereby mitigating the impact of erratic monsoon patterns.” 

Additionally, she also suggested that structural enablers, such as the development of cold storage facilities, are crucial. Buffering surpluses when available through private participation can help stabilise prices and prevent wastage of agricultural produce.

The SBI research report highlighted the correlations between rainfall patterns, food grain production, and inflationary pressures. To stabilise overall food inflation, the government and policymakers need to take immediate measures that can help ensure stable food supplies and reduce the impact of erratic monsoon patterns on the economy.