Reserve Bank of India Deputy Governor Subir Gokarn today said that the government's decision to allow Foreign Direct Investment in multi-brand retail will help increase productivity and ensure an efficient foodgrain distribution network to tackle high food prices. Speaking in Chennai, Gokaran pointed out that the the ultimate solution to high food prices is more production of things that people consume more.

He said increasing the scale of investments in organised retail is one way to increase productivity and distribution efficiency. The Deputy Governor also pointed out that if food prices keep on increasing, it would impact wages and lead to inflationary pressures.

Saying that the country has a fiscal problem and there is a need to find a solution to it, Gokarn said no solution will work with any effectiveness unless the government's subsidy is addressed, because it is by far the largest single burden on government finances.