Successive RBI rate hikes notwithstanding, inflation showed no signs of retracting and remained at an over nine per cent level for the 11th month in a row in October.
The rate of price rise last month rose marginally to 9.73 per cent from 9.72 per cent in September, credited to the mounting inflation in food articles, specially tomatoes (among vegetables) and pulses coupled with high demand in the festival season.
The government expressed the hope that agricultural commodity rates would calm down as a result of good monsoon. “We have already taken steps to address the supply-side shortage,” Finance Minister Pranab Mukherjee said.
However, analysts noted that if overall inflation does not come down drastically next month, it would be a year of high inflation — at over nine per cent mark.
That would be a dismal performance on the price front far a developing economy that is India, they add.
In October, food articles saw inflation surging to 11.06 per cent — from 9.23 per cent the previous month. This was on the back of high inflation seen in vegetables and pulses.
Inflation in vegetables rose to 21.76 per cent in October from 14.04 per cent in September, despite price pressures easing from onions and potatoes.
Onions and potatoes saw inflation easing to a great extent to -16.16 per cent and 1.30 per cent from the heights of 23.58 per cent and 14.64 per cent respectively in September.
Tomatoes, though having a small weight of 0.26 per cent in wholesale price index (WPI), recorded 43.3 per cent inflation in October, up from -24 per cent in September. Late rainfalls have harmed standing tomato crops, particularly in Himachal Pradesh.
Pulses saw the rate of price rise jumping to 9.63 per cent from 2.06 per cent.
There was a 10 per cent shortfall reported in the production of pulses in the kharif season, as 6.43 million tonnes was produced this year as against 7.12 million tonnes last year.
Points out the YES bank report on WPI numbers for October: “While undoubtedly October inflation is uncomforting on several fronts, a sharp depreciation in rupee and a rise in festive related food inflation are the key drivers of inflation in the month.”
The fuel inflation remained steady at 14.79 per cent. Oil marketing companies went to for another petrol price hike of Rs 1.82 per litre in November, the effect of which will be seen in the inflation numbers for this month.
High WPI inflation numbers showed no respite, despite RBI’s repeated attempts to tame it through 13 rate hikes since March 2010. Far from improvement, it is taking a hit at the growth figures.
Recent IIP numbers was a sad story, as industrial production grew by a lowest in two years of 1.9 per cent in September.
However, the central bank’s tight monetary stance did help a check of spread of high inflation in food articles to manufactured products. Inflation in manufactured products remained nearly stable at 7.66 per cent in October versus 7.69 per cent in September.
But, given the high overall inflation numbers and the sliding growth figures, the RBI will have to look at alternative policy options to deal with the inflation issue in its next policy meet on December 16.
At its second quarterly review last month, RBI said it expected inflation to start moderating by December and fall to 7 per cent by March next year.
