June 17, 2010

India's wheat stocks and prices remain high

India's wheat stocks are still high and price increases have impacted retail rates as well, even as the international wheat price has gone down.

Though prices of essential commodities seem to have levelled off, there does not seem much likelihood of their declining any time soon given demand-supply trends for food grain like wheat and pulses in domestic and international markets.

With the government unable to push out its stocks in a manner that brings down prices, it is not able to consider cheaper imports either. The landed price of imported wheat is seen to be fairly competitive and while private players may use this option, the government cannot. Stuck with its stocks, government's policies may actually maintain the price line.

The international supply situation remains tight with India's own demand rising year on year. The government is hoping that what so far seems to be a decent monsoon will result in a plentiful kharif harvest and ease inflationary pressures on food items.