NEW DELHI (Commodity Online): Despite lower inflation rate, the prices of India’s staple foods soared by 30 to 40% on shortage in stocks owing to scanty monsoon. Nearly 167 districts in the country were declared drought. Most of them are major crops growing regions.

However, the government has decided to go ahead with importing schedule in a view to minimize the gap between demand and supply while experts say that would not work out as per the schedule due to higher global prices.

Meanwhile, India’s Finance Minister Pranab Mukherjee on Tuesday said that the economy will grow as to the estimate of over 6% in the fiscal ending March 2010.

There was no point to be panic since the country has the capability to handle the drought, he said. Meanwhile around 161 out of 625 districts in the country are under the threat of drought, he added.



India faced a similar situation in 2006-07 and 2007-08, when a decision to import as much as 7 million tons of wheat amid falling domestic stocks pushed up international prices so much that the country was left paying an import price of Rs16,000 per ton by the time the program ended, compared with a price of around Rs 8,000/ton at the start of the program.

Sure enough, prices rose also because of other factors such as tight global supply, but India’s decision to enter the market after a gap of nearly six years was seen as a major catalyst for the sudden surge in prices.

According to Indian Meteorological Department, the rains during June to September period is likely to be 13%-15% below the 50-year average, down from estimates made of a 7% shortfall at the start of the season.

Monsoon rains are crucial for the summer sown crop in the country particularly rice, wheat, oilseeds, pulses and sugar cane. Industry men say that the monsoon doesn’t improve in the next few days; the country should face acute shortage of essential crops.

As per the government data, the country is estimated to have reaped a record harvest of 99.15 million metric tons of rice in the last fiscal year, of which 84.58 million tons was sown during summer.

Meanwhile, a number of rice-growing states have declared drought in many districts and the latest one to do so is Bihar, located in the east. Key northern sugarcane-growing state of Uttar Pradesh has also said 47 of its 71 districts have been hit by drought.

Industry officials expect a 15%-20% drop in rice output this year, while the area under rice cultivation has fallen 25.5% as of July 30. The government lowered the sugar output estimation to 17 millions tonnes from early 20 million tonnes last week.

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