Marking a break from the declining trend during the second-half of June, food inflation inched up yet again to 12.81 per cent for the week ended July 3 from 12.63 per cent in the previous week following supply disruptions owing to heavy rains in some of the producing States coupled with a partial effect of the hike in fuel prices.
Curiously, however, the WPI (wholesale price index) data revealed a fall in inflation for the ‘fuel and lubricants' category to 14.27 per cent for the week from over 18 per cent a week ago — ostensibly on account of a high base effect — even as the full impact of the hike in fuel prices, especially diesel, is likely to get reflected in the next few weeks of July.
Apart from higher fuel costs, disruption in movement of food items owing to transportation bottlenecks resulted in most edibles turning costlier.
Prices of rice, wheat, pulses and onions, which had been dipping in recent times, went up by 0.03-3.80 per cent on a week-on-week basis.
Potatoes and fruits, however, turned marginally cheaper.
Commenting on the WPI data, Prime Minister's Economic Advisory Council member Govinda Rao said: “The marginal jump [in food inflation] was expected. The hike in fuel prices has definitely led to a jump in the transportation costs. The fuel price hike will take time to be reflected fully.”
In agreement with this view, economic think-tank ICRIER Director Rajiv Kumar noted that the effect of the fuel price hike has not got reflected fully and that will happen during the next few weeks.
For the present, the “Rise [in food inflation] is due to seasonal factors like rain and transportation hassles during the monsoon. The new crop is also yet to come…We expect prices to moderate by October when the new crop comes into the market and the low base of last year is over, he said.”
With the overall inflation level pegged at 10.55 per cent for June, the Reserve Bank of India is expected to hike the short-term lending and borrowing rates by another 25 basis points each on July 27, having done so earlier this month by the same margin in its bid to contain the price spiral.
Keywords: food inflation