Rising food prices can derail economic reforms: PM

The Government admitted that rising food prices would make the task of containing inflation a more difficult exercise.

The Government on Thursday admitted that rising food prices would make the task of containing inflation a more difficult exercise and may hurt economic growth and reforms process, but ruled out any ‘blind controls’ to rein in the increasing rates.

“Efforts to promote reforms and more open economies would be derailed in the face of persistent food shortages and rising food prices. A steep rise in food prices will make inflation control more difficult and can thereby hurt the cause of macro economic stability,” Prime Minister Manmohan Singh said at Global Agro Industries Forum.

“The constituency for economic reforms, so necessary for growth, would also diminish. Pressures would mount for restrictive trade practices,” he added.

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Wholesale prices-based inflation has already touched over a three-year high of seven per cent and various think- tanks– IMF, ADB and Prime Minister’s Advisory Council—have projected a moderation in economic growth for this fiscal.

However, Singh said the situation cannot be resolved by returning to an era of ‘blind controls’ and by depressing agriculture’s terms of trade as it would hurt farmers’ welfare as well as the long-term growth of economy.

“We in India too are deeply concerned about rising global commodity and food prices. Sharply rising food prices can slow down poverty alleviation, impede economic growth and retard employment generation,” he said.

While this will harm global economy in general, developing world will be ‘seriously hurt’, Singh said, after receiving the Agricola Award by FAO for his contribution to the farm and social sector.

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He said increasing global shift to bio-fuels in the face of galloping oil prices is making the situation of food shortages more complex.