The rate of wholesale food inflation rose to 16.44 per cent for the week ended September 18, compared to 15.46 per cent the previous week, mainly due to heavy rain and floods in some parts of the country resulting in a temporary disruption in supply of essential food items.
Food prices have been rising since August and this is for the fifth week in a row that the food inflation has risen. However, according to Finance Minister Pranab Mukherjee, the prices would gradually start cooling down after monsoon.
“Inflation has increased, particularly in food items like jawar or bajra and pulses, fruit, vegetables, meat and eggs. Prices of all these food items have increased. This is an area of concern. But 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 excess liquidity from the market,” Mukherjee said here today.
On the other hand, analysts and economists are not ruling out any action by the Reserve Bank of India (RBI) in its review of the monetary policy in November, even as it has already tightened its grip to a large extent. Earlier this month, RBI had raised its short-term borrowing rates by 50 basis points to 5 per cent and lending rates by 25 basis to points to 6 per cent. RBI Governor D Subbarao had said inflation might continue to be high for a few months.
“This spike is due to disruption in supplies for a brief period, which has really made the prices shoot up. There is still some stickiness in inflation. However, after monsoon, it should start moderating gradually. The fear of a rate increase still looms large, even as the monetary tightening done by RBI in the last two months has been really sharp,” said Cricil Chief Economist D K Joshi.
On an annual basis, prices of cereals rose by 6.11 per cent due to higher prices of pulses, rice and wheat. Prices of pulses, wheat and rice rose by 5.94 per cent, 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, respectively. Among other food items, milk prices soared by 24.32 per cent and onion prices went up by 1.39 per cent in the week, compared to the same period last year.
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“I think RBI is done for this year, even as it is strongly monitoring the inflationary movements. Once the monsoon is over, I feel the numbers would start to ease,” said Nomura India Economist Sonal Varma.
The index for fuels, however, rose at a slower rate of 10.73 per cent during the week ended September 18, compared to 11.48 per cent in the previous week, according to the data released by the commerce and industry ministry.
On September 14, the government shifted the base year for the official wholesale price index to 2004-05, from 1993-94 earlier. As many as 241 new items were also added to the commodities basket. The weight for individual commodities were also altered.