‘Onion price high on supply-side issues’

There can always be a temporary increase in inflation,said Rangarajan.

Written by Agencies | New Delhi | Published:October 25, 2013 4:14 am

Prime Minister’s key economic advisor C Rangarajan on Thursday attributed the spiralling prices of onions to supply constraints and said it will have only a temporary impact on inflation.

“In case of onion and vegetables,it is the supply factor which has been responsible for the push-up in prices. We need to take action on the supply side,increase availability and see that market mechanisms are improved and availability or existing supply is evenly distributed to consumers,” he said.

Rangarajan,who was answering questions on onion prices touching Rs 100 per kg in some cities,said the impact on inflation would not last long.

“It may not have a permanent effect. It may have a temporary effect on inflation,” the chairman of the Prime Minister’s Economic Advisory Council (PMEAC) said.

Inflation as measured by the wholesale price index rose to a seven-month high of 6.46 per cent in September. Food inflation was at 18.40 per cent,led by spiralling onion prices.

Inflation in onions skyrocketed 323 per cent in September.

Rangarajan said: “There can always be a temporary increase in inflation. But once the availability increases,it is expected that supply will get augmented in coming weeks and then it will come down.”

Echoing similar views,commerce minister Anand Sharma said there is no scarcity of onions in the country and prices are expected to stabilise in the coming few weeks.

“Production is good. The question is when the crop will come in a big way to the markets,” he said,adding the situation will improve in the coming days.

Stating that there is no real shortage of onions,Sharma said,“I expect prices to stabilise in coming few weeks. We cannot blame exports because Minimum Export Price (MEP) has been raised and there are hardly any exports.”

There was crop loss due to heavy rains and this has encouraged hoarding,he added.

According to Reuters report,India is also turning to China and sanctions-hit Iran for supplies of onion,and there is even talk of airlifts to ease the soaring prices. The yearly onion demand in the country stands at 15 million tonnes.

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