TNN Aug 12, 2011, 02.20am IST
NEW DELHI: Costly onion, fruits, vegetables and protein-based items pushed food inflation to a three-month high in late July, highlighting the extent of price pressures in the economy and posing another challenge for policymakers.
Data released by the commerce and industry ministry on Thursday showed the wholesale price index for food articles rose an annual 9.90% in the week to July 30, rising from 8.04% in the previous week. Food prices had displayed tentative signs of easing in the previous months but have remained volatile. The data showed onion prices rose an annual 36.62% while the weekly trend showed prices of vegetables, potatoes, fruits, eggs, meat and fish have remained firm.
A sharp increase in the prices of onion last year had pushed food inflation into double-digits and had emerged as a policy headache for the UPA government which is battling a slew of corruption charges. Policymakers have been consistently wrong footed on inflation in the recent past.
The index for food articles group rose by 1.6% to 195.3 from 192.2 for the previous week due to higher prices of fish-inland (17%), poultry chicken and fish-marine (4% each), ragi and fruits & vegetables (2% each) and rice, coffee and gram (1% each).
"For a couple of weeks, rainfall has been deficient and that could have led to some short-term price pressures," said Samiran Chakraborty, economist at Standard Chartered Bank. Economists say it is difficult to draw any sweeping conclusions from sharp fluctuations in weekly food inflation data.
Chakraborty said the Reserve Bank of India was unlikely to reverse its monetary policy stance soon and the central bank would carefully watch the movement of global commodity prices. "They have to be convinced that there is a sustained and continuous fall in commodity prices, only then can they reassess their monetary policy stand," he said.
Expectations of a pause in the central bank's monetary tightening had gathered pace after downgrading of US debt by ratings agency Standard & Poor's sparked off fears of a global economic slowdown and spooked financial markets.
The RBI has raised interest rates 11 times since March 2010 and has said it is ready to sacrifice some growth in the short-term to tackle stubbornly high inflation. Inflation, as measured by the wholesale price index, hovers around 9% now and some economists say there could be a period when it could hit double-digits and then start easing by October-November. Policymakers expect inflation to be around 7-8% by end-March 2012.
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