Rising prices of food items like pulses, sugar and vegetables pushed up inflation to minus 0.21 per cent for the week ended August 22, a rise of 74 basis points over the previous week.
Though inflation remained negative for the 12th week in a row since the week ending June 6, experts say it's only a matter of time before the wholesale price-based inflation turns positive owing to unrelenting rise in food prices.
Inflation for the previous week was minus 0.95 per cent and it stood at 12.76 per cent in the corresponding week last year. The build up of inflation in the current financial year so far is 5.29 per cent.
Sugar price rose by 7 per cent during the week that ended on August 22. Similarly, fruits and vegetables became costly by 4 per cent, jowar, urad and bajra by 3 per cent each, and maize and arhar by 2 per cent each.
"It (rise in inflation) is a major jump. The market was expecting it to be minus 0.87 per cent. Prices of agricultural products in general and food in particular shot up over the week," HDFC Bank Chief Economist Abheek Barua said.
Other items that became expensive during the week include aviation turbine fuel and electricity (5 per cent each), oil cakes (5 per cent), imported edible oil (4 per cent), and plastic items (6 per cent).
Prices of food articles that rose by one per cent each during the week include moong, tea, butter and ghee.
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On annual basis, prices of pulses rose 22 per cent, cereals by about 13 per cent, and fruits and vegetables by as much as 24 per cent.
"Inflation is rising faster than expected. There is a sharp rise in food inflation. In a maximum of a week or two, it will turn positive," Crisil Principal Economist D K Joshi said.
HDFC's Barua, who sees positive inflation in three weeks, said inflationary pressures are not restricted to foodgrains but are also visible in prices of vegetables, meat, fish, and edible oil.
Prices of sugar, khandsari and gur have shot up by 37 per cent over the year ending August 22. Similarly, prices of eggs, meat and fish rose over 14 per cent and of milk by about 10 per cent.
Joshi says the Reserve Bank is not expected to choke the nascent recovery by tightening its rates unless the economy recovers as monetary policy will not be effective in containing food inflation.
However, Barua says if the food inflation persists, it may breed inflationary expectations in the economy prompting the RBI to interfere even though it would be a supply side problem. He expects the first monetary policy move in January.
Among non-food articles, prices of sunflower rose by 3 per cent during the week, raw silk by 2 per cent, and groundnut seed, castor seed and raw rubber by 1 per cent each.
Metals too showed an upward trend with zinc rising by 4 per cent over the week, pig iron by 2 per cent, and steel sheets, plates and strips by 1 per cent each.