According to a Deutsche Bank report, recent measures by the government to control inflation indicate that "bold steps" will be announced in the Union Budget, which is most likely to be presented on 11 July.
With a five-month high inflation of 6.01 percent hanging over the Narendra Modi-government before its first Budget session, Deutsche Bank stated in its report that the steps taken by the Finance Minister in delisting fruits and vegetables from the Agricultural Produce Market Committee (APMC) list and giving farmers the option to sell in the open market directly were bold decisions.
"Some of these measures have been long suggested remedies for curbing food inflation but the erstwhile government was unable to move swiftly on these owing to coalition dynamics," the Deutsche Bank said in a research note, as reported by PTI.
"The swiftness in recommending the exemption of perishables from the APMC is a bold decision, and will lead the market to now expect similar bold steps in the budget," the note added.
On Wednesday, the central government asked states to delist perishables from the APMC, and also imposed a minimum export price of USD 300 per ton on onions, in order to cut down on their export.
"States are being advised to delist fruits and vegetables from the Agricultural produce Market Committee list, which means farmers will have an option of either going through APMC and the middlemen there or the option of going to the open market itself," PTI quoted finance minister Arun Jaitley as saying.
The central government also decided to release 50 lakh tons of rice in the open market for ₹8.30 per kg, and also gave states the freedom to directly import pulses and edible oils in case of shortage.
"These measures are strong indicators of the government's resolve to address food inflation and should assuage the RBI that the government is now walking in lockstep with it to address high inflation," Deutsche Bank said in the report.
The wholesale price index (WPI) inflation rose to 6.01 percent in May, the highest in five months, while in the same month, food inflation reached 9.50 percent.
