Post – Budget Analysis 2010: Price Hike Continues to Rule the Market

By Dr. Hanish Kumar Sinha, Head - Trade and Commodity Intelligence Group, NCMSL

Overall the budget seems to progress in the right direction. The steep price hike owing to increasing foodgrain inflation continued to the major concern for the current budget speech of Finance Minister, Mr. Pranab Mukherjee. The concern over the drought over the last year's monsoon was also reflected.

Few ambitious steps were taken regarding the implementation of 60,000 "pulses and oil seed villages", extension of green revolution to the eastern and north eastern parts of the country, extension of increased credit facilities, provide full exemption from customs duty to refrigeration units required for the manufacture of refrigerated vans or trucks, provide concessional customs duty of 5 per cent to specified agricultural machinery, provide central excise exemption to specified equipment for preservation, storage and processing of agriculture and related sectors and exemption from service tax to the storage and warehousing of their produce and provide full exemption from excise duty to trailers and semi-trailers used in agriculture, concessional import duty to specified machinery for use in the plantation sector to be, extended up to March 31, to exempt the testing and certification of agricultural seeds from service tax and exemption of service tax for transportation of cereals & pulses.

All the steps mentioned above are expected to affect the price in the long run and are not expected to address the current pressure of the rising foodgrain prices. No measures to curb down the prices in the short run were announced. At present, the country is need to harness rising prices for which few measures to ensure increased supplies in the coming times could have been announced. Moreover all the steps mentioned above could run smoothly only if the monsoon for the coming year/years is normal. The announcement of maintaining the basic duty (of 5% crude, 7.5% on diesel & petrol; 10% on other products and enhancing of Central Excise duty on petrol and diesel by Re.1 per litre each) is slightly in the favour of augmenting prices of the agri-commodities. The commodity market is still apprehensive about the measures taken by the Government and expecting few more stringent measures to curb the higher prices. I thus feel that unless some more measures are announced, ensuring the increase in supplies of essential foodgrains, prices will continue to rule the market.

Source : Equity Bulls

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