Sitharaman's fix to ease price pains: Change location of where you produce vegetables

As Indians looks for relief from ongoing pinch in their pockets, Finance Minister Nirmala Sitharaman after presenting the first Union Budget of Prime Minister Narendra Modi's third time has urged the farmers to move closer to densely populated areas to cultivate their produce to help in curbing of food inflation.

"That period is stressful when you don't have enough to reach the market. So, to address the supply side constraints, we've spoken in this budget about horticulture, growing vegetables and perishables closer to where a large population lives. We will make sure cultivation happens closer to dense population areas. We're also saying that we need high-yielding variety and climate-resistant seeds. That's why 109 climate-resistant crop varieties are being brought in," said Sitharaman in an exclusive interaction with ET.

Read more: Food prices on the rise? Finance Minister Nirmala Sitharaman has a plan


Additionally, while talking on food prices, Sitharaman highlighted extreme weather events, unpredictable floods and rains that has affected the supply side. Extreme weather, lower reservoir levels and crop damage have affected farm output and led to higher food prices over the past two years, the government's Economic Survey 2023-24 said on Monday. Unfavourable weather conditions particularly impacted the production prospects of vegetables and pulses, it said.

"In FY23 and FY24, the agriculture sector was affected by extreme weather events, lower reservoir levels, and damaged crops that adversely affected farm output and food prices. So, food inflation based on the Consumer Food Price Index (CFPI) increased from 3.8 per cent in FY22 to 6.6 per cent in FY23 and further to 7.5 per cent in FY24," read the consolidated report on the state of the economy in the previous year.

Sitharaman has a plan:
As vegetable prices soar to nearly Rs 100 in various parts of the national capital and other cities, Sitharaman assured that the 'government is constantly looking at supply side measures, even if it is to import perishable goods, which have actually grown in this country.' "Under the MSME section, BARC (Bhabha Atomic Research Centre) has come up with an irradiation technology for vegetables and perishables. This is India's own technology. We would be setting up and also encouraging MSMEs to set up irradiation centres. This will help with longer shelf life, which will also help farmers get better prices as they will be able to store perishable commodities. We have taken measures to ensure supply side inflationary pressures can be addressed. Monetary policy has its own measures," said Sitharaman on additional measures taken to curb rising food prices.

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For a while, rising food prices remained a pain for Indian consumers, with the inflation rate in the food segment doubling year-on-year in June. Inflation in the food basket was 9.36 per cent in June, up from 8.69 per cent in May, according to the data of the National Statistical Office (NSO). When compared to inflation a year back, India's food inflation nearly doubled last month, from 4.55 per cent to 9.36 per cent.

A significant contributor to persistent inflationary trends has been food prices, particularly notable due to their dominant share in the CPI basket. Contrary to expectations of the temporary shocks, food inflation has remained high over the past year, undermining broader efforts to lower core and fuel inflation through monetary and supply-side interventions.

India's central bank has been targeting headline inflation at 4 per cent, with a tolerance band of 2 percentage points, which shapes its monetary policies, especially interest rates.

Moreover, the RBI has flagged the persistent food inflation in its recent July bulletin by saying it is too long a period for a food price shock to be termed as transitory. "The argument that food price shocks are transitory does not seem to be borne out by the actual experience over the past one year - too long a period for a shock to be termed as transitory!" the central bank said in its July bulletin.

Sporadic spikes in prices of a range of vegetables are giving the broader category of vegetables inflation an enduring character, said the Bulletin.