RBI Governor for stepping up farm productivity to fight food scarcity

Lively interaction :

Reserve Bank of India Governor D. Subbarao being greeted by students at a meeting on the IIT campus in Bhubaneswar on Saturday.

BHUBANESWAR: Reserve Bank of India Governor D. Subbarao here on Saturday emphasised on the need for stepping up agricultural productivity to fight food scarcity and rising food prices. Addressing students of Indian Institute of Technology, Bhubaneswar, here Dr. Subbarao said, “we need to increase production in order to manage prices. In poor country we need to keep food prices low.” “We cannot import food as we have to feed 1.2 billion people. Our food prices are lower than that of world prices. You cannot import food and sell them here unless you subsidise. You cannot expect to subsidise food on a large scale,” he said.  “RBI is responsible for management of inflation. But responsibility for food inflation is slightly lower because food inflation arises because of supply side constraints,” he said. “If you have supply shortages, it is not clear that RBI policies are most effective response. You have to have supply side response that you have to produce more,' Dr. Subbarao said. The RBI Governor, however, said, “monetary policy becomes the first line of defence, so if inflation persists for a long time, people think inflation is going to be high, and that becomes a self-fulfilling prophecy. To break that inflationary-expectations psyche, RBI has to act, which is why we have been acting over the last year.”