Wholesale price-based food inflation shot up to 9.13 per cent for the week ended June 11 – the highest level this financial year – prompting economists to call for an alternative mechanism to RBI’s tight monetary stance for taming price rise. A week ago, food inflation stood at 8.96 per cent.
Food inflation rose despite most food items witnessing a fall in the rates against the previous week’s prices. The rise was due to increasing prices of dairy products and non-vegetarian items. While most food items saw a fall in inflation rate, milk prices have surged by 15.30 per cent during the period against 10.59 a week ago. Similarly, egg, meat and fish inflation rate rose to 10.56 per cent from 7.31 per cent.
The inflation rose despite a high base of 22.93 per cent a year ago. This translates into a rise of over 30 per cent in two years. “... We are in a region of high inflationary regime, which is not acceptable. It will have to be brought down,” said Finance Minister Pranab Mukherjee.
Although the data released today pertains to the week ended June 11, it has come at a time when the Meteorological Department has predicted a below normal level monsoon this year.
“If monsoon rains are not normal, food grain production could plummet. However, even in the case of a good monsoon it is necessary to have adequate infrastructure and supply chain in place to ensure that provisions reach the markets on time,” said Deloitte, Haskin & Sells director Anis Chakravarty.
Ashok Gulati, chairman of the Commission for Agricultural Costs and Prices (CACP) attributed the rise in inflation to increase in cost of labour in agriculture by around 20 per cent this year.
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The issue of food inflation may cast doubts over RBI’s monetary policy — raising policy rates for the tenth time in the last 15 months in its monetary review earlier this month.
Siddharth Shankar, Director, KASSA said:”I feel RBI should not have raised the rates in June, they must have waited to see the impact of the May rise and as such the economy is not expected to grow very robustly.” However, Shankar did recognise that RBI’s move to raise policy rates by steep 50 basis points in May has helped lower non-food inflation.
Chakravarty said: “Pricing pressures have not eased in spite of continuing rate hikes by the RBI. Policymakers may well consider alternative measures to address the sluggish situation.”