Food inflation up at 16.44 prcent

FM says inflation will climb down after monsoon

PTI | September 30, 2010



Food inflation shot past 16 per cent for the week ended September 18, fifth straight week of steady climb, prompting Finance Minister Pranab Mukherjee to express concern over the rising prices of essentials.

"Inflation has increased and particularly the number of food items, like jawar or bajra and pulses, fruits, vegetables, meat, eggs... All these food items prices have increased. This is an area of concern," Mukherjee said.

Food inflation climbed 0.98 percentage points to 16.44 per cent during the week ended September 18, from 15.46 per cent in the previous week, on higher prices of vegetables, milk and pulses.

Mukherjee said, however, "I do feel that after the monsoon period is over, and I do feel it would (be) over in a few days, there would be some moderating influence and the monetary policy, which we have adopted, will also mop up the excess liquidity from the market."

Economists too said the prices would ease as rains recede and Kharif output comes to the market. They said once supply disruptions stop, prices of fruits and vegetables will come down, which is expected after October.

"Once Kharif output arrives in the market post October and supply constraints are lessened as rain recedes, inflation will come down," Crisil Chief Economist D K Joshi said.

Many parts of the country including Delhi, Haryana, Punjab, Uttar Pradesh, Himachal Pradesh, Assam and the desert state of Rajasthan have been witnessing torrential rains and floods that have disrupted supplies of staples. Eastern and northeastern regions are, however, facing drought conditions.

On an annual basis, cereals prices rose by 6.11 per cent, driven mainly by higher prices of pulses, rice and wheat.

While prices of pulses rose 5.94 per cent on a yearly basis, wheat and rice became costlier by 9.14 per cent and 4.05 per cent, respectively.

Fruit and vegetable prices rose by 15.13 per cent and 5.87 per cent.

Among other food items, milk prices soared by 24.32 per cent during the week compared to the same period last year, and onion prices went up by 1.39 per cent. However, potato prices declined by 50.48 per cent, continuing the trend of the last few weeks.

Experts said if food prices continue to rise unabated, the Reserve Bank will tighten its lending and borrowing rates in the next policy rates review in November.

Earlier this month, to tame inflation, the RBI raised key policy rates by up to 50 basis points for the fifth time this year in order to curb consumer spending.

It upped short-term lending (repo) rate by 25 basis points and borrowing (reverse repo) rate by 50 basis points to 6 per cent and 5 per cent, respectively.

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