Food Subsidy Reforms Will Reduce Inflation In India: Moody's

International credit rating agency Moody's Investor Service has said that the reforms that were recommended in food subsidy will reduce inflation and fiscal deficit in India.

"We expect the recommendations to prompt policies that will improve the efficiency of India's food supply chain, a credit positive because it will reduce inflationary pressures and the government's fiscal deficit, two key constraints on the sovereign's credit quality," as per Moody's Sovereign Risk Group.

It is pertinent to mention here that a government-appointed panel had recommended reforms in food subsidy and its distribution system on January 21. The recommended reforms include decentralisation of grain procurement, providing food and fertiliser subsidies through direct cash transfer scheme and lowering the population to be covered under the National Food Security Act to 40% of the total population from 67% at present.

According to the rating agency, the consumer price index (CPI) inflation has been around 9% on an average over the last five years.

“The loss of grain stocks through inefficiency or corruption has raised costs and lowered the socio-economic benefits of the system,” said Moody's.

Moody’s expressed hope that more transparency and efficiency will help in curbing food inflation in the country.