Helping You Build Wealth With Honest Research
Since 1996. Try Now

MEMBER'S LOGIN

MEMBER'S LOGINX

     
Invalid Username / Password
   
     
   
     
 
Invalid Captcha
   
 
 
 
(Please do not use this option on a public machine)
 
     
 
 
 
  Sign Up | Forgot Password?  

Can cash transfer bring down food inflation?
Fri, 15 Feb Pre-Open

Hide and seek is the name of the game when it comes to defining inflation in India, in the past two years. In India, inflation has become smart political excuse to high growth, which neither seems high nor steady. Food inflation in India, as measured by food articles price index, has averaged 11.3% for the period FY09 to December 2012, with a maximum of 15.6% in 2010-11 and minimum of 7.3% in 2011-12.

The reasons for the persistently high food inflation of the last few years have been much debated. Many ascribe it to the rising incomes of Indians, which is leading to greater consumption and pushing up prices. Secondly, the growing penetration of big corporates in the food economy, international trade in food items and speculative futures trading in agricultural commodities has weakened the government's capacity to control food prices. There is also great need to improve supply chains and reduce wastage. Third, the rise in global food prices has also led to increase in domestic prices.

The government is hoping that their much talked about and possibly game changer scheme of direct cash transfer may help in reducing food inflation. A cash transfer scheme could potentially help prevent corruption through leakages and diversions (because there are no physical resources such as grains or medicines that need to be handled anymore). The Reserve Bank of India (RBI) has also welcomed the implementation of the scheme. The bank has said that this initiative will help reduce fiscal deficit, which in turn will also bring down inflation if implemented well. Direct transfer can stimulate the economy by increasing public spending due to cash actually reaching the hands of the beneficiaries. This stimulation effect could be significant given that estimates post the loss due to subsidy leakages at nearly 40%. Hopefully, action on these policy fronts can tame this monster of food inflation that is eroding the confidence of India growth story.

For information on how to pick stocks that have the potential to deliver big returns, download our special report now!

View all commentaries | Archives

Read the latest Market Commentary


Equitymaster requests your view! Post a comment on "Can cash transfer bring down food inflation?". Click here!

  
ABOUT EQUITYMASTER

Since 1996, Equitymaster has been the source for honest and credible opinions on investing in India. With solid research and in-depth analysis Equitymaster is dedicated towards making its readers- smarter, more confident and richer every day. Here's why hundreds of thousands of readers spread across more than 70 countries Trust Equitymaster.

PREMIUM PRODUCTS
QUICK LINKS
POPULAR TOPICS
TRENDING TOPICS
FREE NEWSLETTERS
EQUITYMASTER SUPPORTS
  • HelpYourNGO
  • You Tube
  • Linkedin
  • Twitter
  • Telegram
  • Google Play

Copyright © Equitymaster Agora Research Private Limited.

Whitelist | Refer | Terms | Privacy | Contact | About | Sitemap

Phone +91-9136015013

Equitymaster Agora Research Private Limited (Research Analyst)
SEBI (Research Analysts) Regulations 2014, Registration No. INH000000537.

103, Regent Chambers, Above Status Restaurant, Nariman Point, Mumbai - 400 021. India.
Telephone: +91-22-61434055. Email: info@equitymaster.com. Website: www.equitymaster.com.
CIN:U74999MH2007PTC175407

Name of the Compliance & Grievance Officer: Ms Sonal Ramachandran
Telephone: +91-22-61434003 | Email: compliance@equitymaster.com

LEGAL DISCLAIMER:
Investment in securities market are subject to market risks. Read all the related documents carefully before investing.
Registration granted by SEBI and certification from NISM in no way guarantee performance of the intermediary or provide any assurance of returns to investors.

All rights reserved. Any act of copying, reproducing or distributing this newsletter whether wholly or in part, for any purpose without the permission of Equitymaster is strictly prohibited and shall be deemed to be copyright infringement.

Equitymaster Agora Research Private Limited (Research Analyst) bearing Registration No. INH000000537 (hereinafter referred as 'Equitymaster') is an independent equity research Company. Equitymaster is not an Investment Adviser. Information herein should be regarded as a resource only and should be used at one's own risk. This is not an offer to sell or solicitation to buy any securities and Equitymaster will not be liable for any losses incurred or investment(s) made or decisions taken/or not taken based on the information provided herein. Information contained herein does not constitute investment advice or a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual subscribers. Before acting on any recommendation, subscribers should consider whether it is suitable for their particular circumstances and, if necessary, seek an independent professional advice. This is not directed for access or use by anyone in a country, especially, USA, Canada or the European Union countries, where such use or access is unlawful or which may subject Equitymaster or its affiliates to any registration or licensing requirement. All content and information is provided on an 'As Is' basis by Equitymaster. Information herein is believed to be reliable but Equitymaster does not warrant its completeness or accuracy and expressly disclaims all warranties and conditions of any kind, whether express or implied. Equitymaster may hold shares in the company/ies discussed herein. As a condition to accessing Equitymaster content and website, you agree to our Terms and Conditions of Use, available here. The performance data quoted represents past performance and does not guarantee future results.