Food inflation, as measured by the Wholesale Price Index (WPI) inched towards double digits at 9.46 per cent for the week ended December 4, primarily due to rising prices of essential commodities like wheat, rice and vegetables.
Food inflation increased for a consecutive month after moderating to single digits in the third week of November. The inflation rate stood at 8.69 per cent in the week ended November 20, and at 9.46 per cent during the corresponding week in 2009.
The increase in food prices is due to a decline in supplies as a result of unseasonal rains. Food inflation is expected to firm up in the coming months, despite a high statistical base effect due to a slower Rabi sowing and less supply in the markets.
“Food inflation will remain high. Perhaps the spikes will not be as pronounced as in 2009, unless there is deficient monsoon but it will continue to be a concern,” said D K Joshi, chief economist with ratings agency Crisil.
Fuel prices also saw an increase during the week, as the inflation rate in this category rose to 10.67 per cent for the week, compared with 9.99 per cent during the previous week.
“You can see the impact of rising oil prices in the index even as the impact of the recent increase in price of petrol, which is a part of the administered components of the fuel index, is not felt yet. The inflation for this category will rise further,” said Shubhada Rao, chief economist, YES Bank.
During the week under consideration, prices of cereals and rice became expensive by 0.18 per cent each, while vegetables saw the highest price increase at 4.18 per cent. Amongst vegetables, prices of potatoes and vegetables increased by 14.6 per cent and 9.93 per cent, respectively. Fruits became more expensive by 0.55 per cent during the week.
More From This Section
Even as the central bank refrained from raising key policy rates and the cash reserve ratio due to a moderation in overall inflation and liquidity concerns in its December mid-quarter monetary policy review, it said inflationary pressures persist both from domestic demand and higher global commodity prices.
“The pace of decline in food price inflation has been slower than expected, largely due to structural factors,” the Reserve Bank of India said.