India Budget 2014: Ample Food Stocks to Check Price Rises

Indian farmers from the Gujarat state are pictured under monsoon clouds as they clean a canal water tank, in July 2014.Reuters

Weak rainfall in India is expected to hit the nation's farm output this year but fears surrounding higher food inflation are unwarranted as the nation's ample food stocks and the government's proposed price stabilisation fund will help check price rises.

Since the arrival of monsoon rains in India, in the first week of June, rainfall has been 41% below average for the week ended 9 July, according to data from the India Meteorological Department, marking the fifth consecutive week of poor rains.

The June-September monsoon accounts for 70% of India's rainfall and irrigates more than half its farmland.

As such, poor rainfall is bound to hit farm output, boosting the prices of vegetables and that of major food grains such as rice and wheat.

However, Finance Minister Arun Jaitley, dispelling fears of potential food scarcity and higher prices in India, said the nation has adequate food stocks to deal with a drop in output from a weak monsoon.

Jaitley also proposed setting up a price stabilisation fund for farm produce. The minister made these remarks in his maiden budget speech in Parliament on 10 July.

Lower Output

India's farm output "might fall below 100 million tonnes in 2014 as things stand currently", Darren Cooper, senior economist at London-based International Grains Council (IGC), told IBTimes UK. He was referring to disappointing monsoon rains.

But while "tighter supplies, by way of a reduced summer-sown (kharif) rice harvest in 2014, could lead to higher inflation...to some extent, large centrally-held stocks of wheat and rice from past harvests will likely probably provide a cushion," Cooper added.

Total farm production in India in 2013, from the summer and winter harvests, stood at 105.6 million tonnes.

India's farm sector accounts for some 14% of its nearly $2tn (£1.2tn, €1.5tn) economy, and two-thirds of the nation's 1.2 billion population live in rural areas.