Rajan blames high food prices on frequent MSP hikes

On Agriculture Produce Marketing Committee (APMC) Act, he said: “There is a need to reduce the wedge between what the farmer gets and what is paid by the household by reducing the role, number, and monopoly power of middlemen as well as by improving logistics.”

APMC Act provides a platform to farmers to sell their produce to agents or traders. Increased liquidity flow into rural areas has resulted in growth in agricultural wages. The Centre's rural employment scheme (MGNREGA) has also led to a massive rise in rural wages in the past few years, the Governor said.

To contain food inflation and raise food production, there is a need to contain the rise in wages elsewhere, he said. “Contain any unwarranted rise in rural wages as well as the rise in other agricultural input costs (though not through subsidies) so that the farmer gets a higher return.”

Dwelling further on the causes of high food inflation, he said an increase in production costs, primarily rural wage inflation, has also resulted in elevated prices. Food prices are high also due to growing prosperity and shift in dietary habits of people, he added.