Drawing attention of the State Governments to the build-up in food inflation in the last few weeks, the Finance Minister, in his letter to all the Chief Ministers has mentioned that in the last few weeks, the food article inflation has shown a rising trend and stands at 18.3 per cent for the week ending on 25th December 2010. The Finance Minister has stated that much of this inflation has been due to significant increase in the prices of a few primary items like fruits and vegetables, milk, meat, poultry, eggs and fish. He has also mentioned in his letter that the inflation data that was released yesterday shows that three-fourth of food inflation is due to rising prices of vegetables, and nearly one-fourth is due to milk prices. Shri Mukherjee said that in the current financial year, the prices of cereals and pulses have declined sharply and continue to do so even in the recent weeks when the trend in food inflation has reversed. While there are some weather induced supply constraints on some of the items currently exhibiting high inflation, which goes against the seasonal decline in prices normally seen at this time of the year, a larger part of price rise is due to the widening gap between the wholesale and retail prices and the growing demand for these products due to rising income levels, writes the Finance Minister.

The Finance Minister said that from a high of nearly 21 per cent in April 2010, due to our collective efforts, the year-on-year food inflation declined to 8.60 per cent on 20th November, 2010. He said that this trend has reversed since then.

In this context, the Finance Minister mentioned that he would like to request the Chief Ministers to urgently look into the supply management of items that are driving the current round of food inflation in the economy, in particular the local factors that are widening the gap between the wholesale and retail prices. He asks the State Governments to ensure that all bottlenecks in the supply chain are removed at the earliest and the availability of the food items causing inflation is improved so that their prices can be brought down quickly.