India to Sell 25% of Rice Stocks in Bid to Curb Inflation

India will offload about a quarter of its rice stockpiles and ease restrictions on selling fruits and vegetables to stem Asia’s second-fastest inflation as a weak monsoon threatens to curb crop output.

Prime Minister Narendra Modi’s administration will sell 5 million tons of rice from central reserves at subsidized rates as soon as possible, Food Minister Ram Vilas Paswan told reporters in New Delhi on 17 June. It will also help states import pulses and cooking oil if needed, and fix minimum export prices for potatoes to discourage overseas sales, Finance Minister Arun Jaitley said separately.

Modi’s government faces pressure to curb quickening inflation several weeks after taking power in a nation where about 70 percent of the population lives on less than $2 a day. Wholesale price inflation accelerated to the fastest pace in five months in May and consumer prices rose 8.28 percent.

Inflation Risks

More than half of India’s farmlands get water from the June-September rainfall, which has been 49 percent below normal so far. Food Corp. of India, the nation’s procuring agency, has been instructed not to retain grains for more than 18 months, Paswan said.

Jaitley said farmers will be permitted to sell fruits and vegetables anywhere they wish rather than only in state-controlled markets. The government on 17 June imposed a minimum export price of $300 per ton for onions.

Food costs have boosted the inflation rate in the last couple of months and “the hope is that with appropriate food management these prices will come down,” Reserve Bank of India Governor Raghuram Rajan said in Mumbai on 17 June. He held the benchmark repurchase rate at 8 percent on June 3, and said further tightening won’t be warranted if consumer-price inflation stays on course to hit 8 percent in January 2015.

The government has amassed about 21 million tons of rice and 42 million tons of wheat, more than twice the recommended buffer stock, Agriculture Minister Radha Mohan Singh said on June 9. Other contingency measures under consideration include a diesel subsidy to allow farmers to run pumps to irrigate standing crops, and more government funds to help buy seeds.