The key reasons for food and general inflation are well known: more money in the market, lack of storage capacity, and lack of infrastructure and transport facilities. Food inflation is now an emerging global worry. The Food and Agriculture Organisation has pointed out that the increasing diversion to cash crops will limit the production capacity of individual food crops, leading to higher prices of food and supply shocks in 2011 and the coming years.
The Reserve Bank of India is now engaged in pushing price inflation back. The hike in key rates had to follow in the aftermath of a prolonged flirtation with growth- based induction of liquidity. The government should now focus on building infrastructure, putting a lid on the deficit and improving supply-side economics and a comprehensive strategy to tame it.
R Narayanan, Ghaziabad
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