The rupee devaluation will cause spirals in a number of essential commodities beginning January next year, traders warned yesterday.
The market was fully stocked with commodities like rice, flour, sugar, dhal and eggs, Old Moor Traders Association President K. Palaniandy told the Sunday Times. Members of the Association hold the virtual monopoly for the supply and distribution of a variety of essential food items.
Hence, Mr. Palaniandy said, during the Christmas and New Year seasons, the pre-budget prices would remain. However, the increases would come when fresh orders were placed.
One item, for which a price rise would become inevitable, trade sources said yesterday, was milk powder. The Consumer Affairs Authority has so far resisted a price increase.
However, it would be impossible to import milk powder at a higher price and market it, a leading importer said yesterday. A similar problem exists in the drug imports sector, a member of the trade said.
The rupee was devalued by three per cent in government’s budget last month to boost exports and limit imports.
However, the Central Bank has re-assured bankers, over the past two weeks that the rupee will be kept at current levels as “stability and consistency” are the key to banking operations in dealing with import and export demands.
The rupee was trading at around Rs 113.90 a US dollar this week against Rs 110.90 just before the devaluation.
Dealers said the Central Bank had pumped about 50 million US dollars into the money market this week to keep the rupee at current levels. This is instead of the rupee either gaining in value or depreciating.