Better distribution of food grains important before imports.

The government is keeping the option of importing food grains open as the country

grapples with the issue of high food prices, but not before it can manage to better distribute the 44 million tonne of food grains it has in storage, said PM’s Economic Advisory Council chairman C Rangarajan on Friday.

Food inflation for the week ended November 21 shot up to 17.47 per cent, according to official government data released on Thursday.

“In a situation when food prices are rising, supply management is extremely important,” said Rangarajan on the sidelines of the ICC regional CEO Forum in the Capital.

“We have a stock of 44 million tonne of food grains. Therefore, we must utilise the stocks and distribute the stocks in a manner that will have a dampening effect (on food inflation). But a view on imports can be taken after watching what is happening to the kharif output,” he said, adding that, “it is good to keep the option open” on importing rice.

In November, finance minister Pranab Mukherjee had told Parliament that India may import rice for the first time in 20 years, but did not indicate the quantity or the timeline for the imports.

At the event, Rangarajan also said the government is likely to start winding down stimulus measures by next year if growth of 7 per cent could be maintained.

“We have good data on the second quarter of the financial year. If this trend continues, and if we do have good growth rate, of 7 per cent or around, during 2009-10, then I think they can consider (withdrawing the stimulus),” he said. The PMEAC chairman expects a 7-8 per cent GDP growth in 2010-2011. “We may as well see a 9 per cent growth in 2011-12 if world trade picks up,” he said.

The former RBI governor also expects the central bank to monitor the food price in the Oct-Dec quarter and bring in monetary tightening measures.

“I think while food inflation must be primarily be dealt though supply management, there is a role for monetary policy as well. In a period of scarcity, the money supply growth is very strong. That will also aggravate the food inflation situation. Therefore, RBI could take steps after watching the Nov-Dec figures to restrain liquidity,” said Rangarajan.