After a upward profile, food inflation has eased, but only marginally — thus coming as no major relief for the common man. It remained at an elevated level of well above 9 per cent, even as it was evident that the Reserve Bank of India was readying for another rate hike on October 25.
Experts sense the matter is multi-layered. “The worrying part is the rise in the food inflation numbers on a sequential basis,” notes Siddharth Shankar, director of Kassa, a capital-based financial services organisation. All the same, some economists attribute the easing of inflation to the base effect.
Going by a break-up, inflation in onion has moved in the negative territory this time, after touching the heights of 57 per cent two months ago. The rate of price rise in the bulbous vegetable has since been constant and dropped to -10.15 per cent during the week ended October 1. It was 10.58 per cent the week before. As for potato, the inflation eased 5.55 percentage points to 3.79 per cent.
In fact, it has been on a falling spree since September 3, when it stood at 21.16 per cent.
Egg, meat and fish experienced a marginal fall in price rise from 10.33 per cent to 9.92 per cent.
More From This Section
On the other hand, cereals saw inflation crawl to 5.41 per cent versus 4.57 per cent the earlier week. Rice and wheat, too, exhibited a similar trend: their inflation climbed to 5.41 per cent and -0.24 per cent from 4.13 per cent and -1.01 per cent earlier respectively.
Shankar says one should expect “some relief” in the food inflation numbers around the first week of next month.
Fuel and power also experienced a surge in inflation to 15.10 per cent from 14.69 per cent earlier.
Another rate hike by the country’s central bank would depend majorly on the September inflation numbers. They are to come out tomorrow.
IMF for further monetary tightening
The International Monetary Fund’s (IMF’s) Asia-Pacific Regional Economic Outlook has suggested further monetary tightening to tame inflation in India. IMF said in India, robust disposable income growth (including from high agricultural prices) and still “accommodative” financial conditions are expected to support private consumption and investment.
The report said policymakers in Asia face a delicate balancing act as fears of spillovers from global growth and high inflation pressures mount on the region.
Inflation pressures have been elevated in a number of other Asian economies amid accommodative financial conditions, but should recede as food and energy prices gradually moderate, the report said.
A worsening of the financial turbulence in the euro area and a more severe slowdown than anticipated in the United States would have clear macroeconomic and financial spillovers to Asia an extreme downside risk for Asia.
While domestic demand remains strong, “Asia has clearly not decoupled” from advanced economies,” the IMF says.
“Though domestic demand remains strong, we cannot say that Asia will be immune from risks materialising in the rest of the world”, cautioned Anoop Singh, Director, Asia Pacific Department, IMF.
He said as one third of the trade in Asia is from the United States and Europe, “the uncertainty from the advanced economies will have significant effect on Asia from the trade side”.
In India, where corporate funding relies increasingly on external commercial borrowing and equity finance, a severe fall in investment would severely curtail growth, the report said.
IMF report said the crisis in advanced economies is a reminder of the need for Asia to now make further progress with economic rebalancing and develop stronger domestic engines of growth. In addition to structural reforms, this would require a reprioritisation of fiscal spending, in order to create fiscal space for critical infrastructure investment and social priority expenditure.