Milk, pulses push food inflation up after a four-month low

Food inflation climbs to 16.35 pc after falling to 16.22 pc last week

PTI | April 1, 2010



Higher prices of milk and pulses drove food inflation up to 16.35 per cent for the week ended March 20 and this could, in turn, contribute to overall inflation touching double digits.

Food inflation had hit a four-month low of 16.22 per cent in the previous week.

In view of the rising prices of essential goods and fears of food inflation spreading to manufactured goods, experts feel the RBI could take more measures in its forthcoming monetary policy on April 20 to contain price rise.

The overall inflation, which includes variation in prices of food and non-food items, was 9.89 per cent in February and is estimated to cross double-digit mark soon.

"I expect overall inflation to be at 10.7 per cent in March. To tame inflation, the Reserve Bank could take monetary tightening measures in the April policy by raising repo, reverse repo and cash reverse ratio by 25 basis points each," HDFC Bank economist Jyotinder Kaur said.

Food inflation, she said, is likely to soften in the coming months but higher fuel cost would continue to put pressure on prices.

On an annual basis, pulses became dearer by 31.55 per cent, milk prices 18.74 per cent and wheat 13.5 per cent.

As far as weekly variation is concerned, the index for food articles rose by 0.6 per cent as barley, milk, moong and condiments, spices urad and arhar became expensive.

In the fuel group, ATF (aviation turbine fuel) became dearer by 3 per cent. Besides other factors, rise in prices can also be attributed to recent hike excise duty of various goods and increase in prices of petrol and diesel, pursuant budgetary announcements in February.

Last month, the RBI raised key short term lending and borrowing (repo and reverse repo) rates by 25 basis points to five per cent and 3.5 per cent, respectively, to check inflation from spreading to non-food items.

General inflation had already surpassed RBI's March end projection of 8.5 per cent.

Recently, RBI governor D Subbarao had also said that the apex bank will continue its exit from monetary stimulus policy to check high inflation and ensure sustainable growth.

Finance Minister Pranab Mukherjee had said that food inflation may spread to non-food items over a period, although food prices have started coming down.

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