India May Have Won the Battle With Food Inflation Before the First Drop of Monsoon Rain – India Real Time – WSJ

Around this time every year, farmers and economists look to India’s skies, hoping for the arrival of the monsoon rains.

Late and less rain hurts crops and triggers inflation, goes the traditional worry, so every day of delay or deficit in downpours threatens to derail the country’s fragile growth.

The problem with this annual, rational worry, however, is that it’s just, plain wrong.

Good and bad monsoons in recent years have had limited effect on growth or even on food inflation, according to a report this week from Nomura. What is much more important in determining how fast food prices rise, the report says, is the minimum support prices New Delhi sets for certain crucial commodities.

So instead of looking to the skies, central bankers and other inflation fighters should be looking to New Delhi.

This year the monsoon is predicted to be above normal but much more importantly, the weather over the capital is looking promising. On Thursday, India’s weather department upheld its monsoon forecast and said it expects rainfall to be 106% of the long-term average.

On Wednesday the government announced the minimum support prices for the most basic Indian staples–dal and rice—and capped the increases at less than 10%. In some years when the government looked to help farmers it has ratcheted up the prices more than 15%, triggering inflation.

Source: India May Have Won the Battle With Food Inflation Before the First Drop of Monsoon Rain – India Real Time – WSJ

Advertisements

One Comment to “India May Have Won the Battle With Food Inflation Before the First Drop of Monsoon Rain – India Real Time – WSJ”

  1. India May Have Won the Battle With Food Inflation Before the First Drop of Monsoon Rain – India Real Time – WSJ

    This shows a very positive for India, and confidence in Mr Modi’s Administration.

    Like

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

Law of Unintended Consequences

continuously updated blog about China & India

ChiaHou's Book Reviews

continuously updated blog about China & India

What's wrong with the world; and its economy

continuously updated blog about China & India

%d bloggers like this: