Food inflation in the week to October 15 zoomed to a six-month high of 11.43 per cent, as demand pressure mounted during the festive season and supply of pulses and some vegetables like tomatoes fell, defending the Reserve Bank of India’s decision to persist with monetary tightening to tame surging prices.
However, many economists said high food inflation could not be pinpointed to a few items and it was becoming a larger systemic problem due to high input costs and rising demand. Food inflation entered the double-digit zone at 10.60 per cent a week before. Even a high base of 14.20 per cent during the corresponding week of last year could not arrest the rise, indicating accentuating price pressure on food items. The last time food inflation was higher than this number was during the week to April 9, when it stood at 11.53 per cent.
The escalated number could be attributed to high inflation in pulses and vegetables, mainly tomatoes. The rate of price rise in vegetables leaped to 25 per cent, from 17.59 per cent a week ago, though inflation in onions and potatoes continued to fall at -18.93 per cent and -0.45 per cent, from -11.27 per cent and 1.73 per cent, respectively. However, the rate of price rise in tomatoes shot up to 54.76 per cent, from 14.17 per cent last week.
“During this time of the year, major supply comes from Himachal Pradesh, but after the monsoon rains, the area has become completely dry, which may be the reason for the escalating tomato inflation,” said Ramesh Chand, director, National Centre for Agricultural Economics and Policy Research.
He said even if inflation in tomatoes rose 100 per cent, the spurt in food inflation numbers could not be justified. “The whole agriculture industry is experiencing high cost of production and high demand. It is futile to expect high food prices to grow at a slower pace,” he said. Inflation in pulses rose to 9.06 per cent, from 7.42 per cent a week before. But in case of egg, meat and fish, inflation declined to 12.82 per cent, from 14.10 per cent.
Aditi Nayar, economist, Icra, said, “With vegetable prices unlikely to ease until after the festive season, food inflation may remain elevated in the remaining weeks of October.” However, some economists expressed hope inflation had a greater chance to come under control. “While inflation has gone up on a sequential basis, I feel the spread of the rise across sectors is much better and the probability of it getting under control is higher,” said Siddharth Shankar, director, KASSA. He expected the numbers to fall in the last week of October or the first week of November.
In its quarterly review of the monetary policy earlier this week, the Reserve Bank said it expected inflation to remain elevated till December on account of demand-supply mismatch, before moderating to seven per cent by March from 9.72 per cent in September.