Farm outlook brightens, food prices to dip: PM

Even as prices are expected to stabilise in the near-term, an official panel would be constituted to recommend long-term measures for increasing agricultural production and for reducing the gap between farm gate and retail prices, a government statement said later in the day.

India's food price index rose an annual 17.56 percent in late January, just ahead of the Reserve Bank of India (RBI) setting the stage for rate hikes by raising banks' cash reserve requirements by more than markets had been expecting.

As persistently high food prices spill over into broader inflation and stoke public anger, government officials and the RBI are walking a fine line between controlling prices and nurturing the recovering economy.

Singh told a conference of chief ministers of states that provincial governments should improve data collection as gloomy forecasts after 2010 saw the worst monsoon in 37 years raise inflationary expectations.

"This year the initial data made available by states showed much less production than what the states' latest estimates show," Singh said.

The government is expected to issue the latest crop estimates next week.

In November, the government said the country's summer-sown rice output would fall 18 percent, while cane production would drop 9 percent -- a forecast that raised the prospect of higher food prices and large imports of sugar and rice.

"As expectations play a very big role in determining food prices, the initial low expectation, therefore, also contributed to the price increase," the prime minister said.

Prospects of large imports by India, the world's top sugar consumer, catapulted New York raw sugar futures to a 29-year high this week, although on Friday, fears over the global economy helped futures fall to a six-week low.

Singh said the prospects for winter-sown crops were also bright, further improving the supply situation.

"Post-monsoon rains have been good. All this augurs well for our ability to stabilise food prices at a reasonable level," he said.