Food inflation at one-month high

Figure surges to 8.55 percent, petrol price hike may only add to it

PTI | May 26, 2011



Food inflation surged to a one-month high of 8.55 percent for the week ended May 14, driven largely by the spiralling cost of fruits, and experts have warned of the recent petrol price hike further fuelling the rate of price rise.

The firming up of food inflation, coupled with rising prices of manufactured items, may prompt the Reserve Bank to take more steps to tackle price rise at its mid-quarterly monetary policy review next month.

Food inflation rose by a hefty 1.08 percentage points during the week under review from 7.47 per cent in the previous week, official data showed. On an annual basis, prices of primary articles went up by 23.22 per cent.

"The non-food articles category is already under pressure. Going forward as food inflation moderates, fuel inflation will see an upward move," Crisil Principal Economist D K Joshi said.

On an annual basis, fuel and power inflation stood at 12.11 per cent during the week ended May 14.

During the week ended May 14, prices of fruits rose by 32.37 per cent, milk by 5.53 per cent and eggs, meat and fish by 8.26 per cent.

In addition, cereals became costlier by 5.03 per cent year-on-year and prices of onions were up by 8.32 per cent, official data released here showed.

However, prices of vegetables and pulses declined by 1.46 per cent and 9.49 per cent, respectively. Also, wheat became cheaper by 0.30 per cent on an annual basis.

Experts said even as inflation in the food articles category is showing signs of a decline, fuel inflation will add to the woes of the government in the coming days when the recent petrol price hike is factored in.

Oil marketing companies hiked petrol prices by Rs 5 per litre with effect from May 14 midnight, the effects of which will be visible in the food inflation data for the week ended May 21.

"Inflation is expected to rise further sometime in July- August when I expect the fuel & power inflation to rise. We may see a hike in diesel prices in the coming 6-8 weeks and that will add to inflationary pressures," KASSA Director Siddharth Shankar said.

Among the other food items, on an annual basis, prices of rice rose by 2.63 per cent and potatoes by 0.17 per cent.

Commenting on the inflation numbers, Deloitte Haskins & Sells Director Anis Chakravarty said, "Pricing pressures have not eased inspite of the determined rate hikes by the RBI."

Food inflation remained in double digits for most of 2010, before showing signs of moderation from March, 2011.

On the other hand, prices of non-food primary articles were up 23.22 per cent during the week under review. Fibres became dearer by almost 61 per cent, while minerals were up 11.78 per cent.

The government and Reserve Bank had said that in the months to come, inflationary pressure would be more from core (non-food) items on account of high global prices of commodities, particularly crude.

"I expect the liquidity situation to tighten in the coming months something that will adversely affect the industry," Shankar said.

The RBI has already hiked policy rates nine times since March, 2010, to check spiralling prices.

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