india at risk of repeated and overlapping food price shocks, says RBI governor
Published on: November 9, 2023.
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Rice Stocks Double Target, Ensuring Comfortable Supplies for Domestic Market
India’s Inflation Challenges
India’s vulnerability to food price shocks persists, warns the Reserve Bank of India (RBI) Governor, Shaktikanta Das. Although inflation has recently moderated, the RBI remains watchful and actively disinflationary to align inflation with the target while promoting growth. India’s retail inflation dropped to a three-month low of 5.02% in September, primarily driven by reduced vegetable prices, but it remains slightly above the RBI’s 4% target. The central bank predicts that inflation will average 5.4% in the fiscal year 2023-24, down from 6.7% in the previous financial year.
The RBI remains highly alert and prepared to take necessary steps to achieve its inflation target. The retail inflation data for October is scheduled to be released on November 13. Governor Das highlights the challenges faced by the global economy, following recent developments in West Asia. To tackle potential eventualities, the RBI has bolstered foreign exchange reserves. It emphasizes that India’s growth is on track, with a manageable current account deficit, healthy bank and corporate balance sheets.
Plentiful Rice Stocks
As the world’s second-largest rice producer, India has surpassed its target, reporting double the amount of rice stocks in November. With the new season crop entering the market, this surplus ensures a comfortable supply for the domestic market. In July, India, the largest rice exporter worldwide, unexpectedly halted non-basmati white rice exports, leading to multi-year high global prices.
According to government sources, India’s rice stocks, which include unmilled husk varieties stored in state warehouses, reached 19.7 million metric tons. To comply with local government regulations, state-run warehouses must hold 8.2 million metric tons of rice for the quarter starting on October 1. Additionally, they must maintain an extra 2 million metric tons of rice as strategic reserves.
Although Indian farmers anticipate a decrease in this year’s new season rice crop due to an irregular monsoon, the purchases made by India’s state-run Food Corporation of India will increase rice inventories in state granaries. Despite a larger area under rice paddy cultivation, output may fall by up to 8% compared to last year’s record-breaking harvest.
Wheat Stocks Exceed Target
India’s wheat stocks in state warehouses totaled 21.6 million metric tons, surpassing the state-set target by over 23%. The surplus wheat stocks provide an opportunity for the government to offer more supplies to bulk consumers, including flour millers and biscuit makers, helping cool prices. The government has been selling wheat on the open market to control prices, which recently reached their highest level in almost eight months. Last year, India banned wheat exports after weather conditions threatened to reduce output. India is the world’s second-largest producer of wheat after China.
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