India's Modi government takes steps to control inflation

Wed Jun 18, 2014 4:57am EDT
 
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By Rajesh Kumar Singh and Aditi Shah

NEW DELHI (Reuters) - India's new government on Tuesday imposed export restrictions on certain farm commodities and ordered a crackdown on hoarding to control rising food prices, a day after wholesale price inflation hit a five-month high.

A jump in prices of potatoes and onions last month drove inflation to 6.01 percent from 5.20 percent in April, contributing to a sell-off in financial markets.

Prime Minister Narendra Modi, who was elected last month amid widespread anger over rising prices, has made tackling inflation his top priority.

Forecasts of weak monsoon rains that irrigate much of India's food production have added to inflation fears, and volatile vegetable prices have risen by double digits.

Finance Minister Arun Jaitley, who held a meeting on Tuesday to decide steps to control food inflation, said the government was keeping a close watch on the price movements of 22 commodities and would offload additional rice stocks in the market to prevent a build-up in inflationary expectations. The government is planning to release 5 million tonnes of rice from state stockpiles to curb inflation, Food Minister Ram Vilas Paswan told reporters.

"The government would be releasing additional rice stocks from government warehouses for supplies to the state governments," Paswan told reporters.

The government also imposed a minimum export price on onions of $300 per tonne from $150 per tonne to discourage overseas shipments and Jaitley said a similar curb would be imposed on exports of potatoes.

"Even though the increase (in food prices) has only been marginal, we don't want anybody to exploit the situation," he told reporters after the meeting. "And therefore, in anticipation of any further market reaction, a series of steps have been decided and they are being put into place."   Continued...

 
Customers purchase onions at a vegetable market in Jammu February 4, 2013. REUTERS/Mukesh Gupta