Driven mainly by higher prices of potatoes and pulses, food inflation inched up to 17.94 per cent during the week ended January 30 from 17.56 per cent in the previous week even as the government has geared into action and the measures now being put to place are expected to soften the prices of essential items soon.

With food inflation rising for the third straight week to nearly 18 per cent and very close to the decade’s high of 20 per cent touched in December last year, there are apprehensions that the price spiral may creep into the overall WPI (wholesale price index) inflation which is already expected to be over nine per cent by the end of the current fiscal.

In the event, among the measures to combat the price rise, the government may choose to continue with the duty-free imports of food items such as wheat, rice, pulses, sugar and edible oils. Last week, even as Prime Minister had said that “the worst is over as far as food inflation is concerned” while expressing confidence on bringing about stability in food prices, RBI Deputy Governor Subir Gokarn on Thursday noted that food inflation is expected to moderate towards the year-end, but only “in the event of [a] normal monsoon.”

Coupled with this is the prospect of a hike in fuel prices as suggested by the Kirit Parikh panel which, if implemented, is likely to add further inflationary pressures. The expert group recommended deregulation of petrol and diesel prices and raising LPG rates by Rs. 100 a cylinder and kerosene by Rs. 6 a litre. Freeing petrol and diesel prices would mean an increase of Rs. 3 a litre of petrol and Rs. 3-4 on diesel. The Government is yet to take a decision on the issue owing to lack of consensus among the UPA partners.

Already, for the January 30 week, the index for fuel group rose by 1.2 per cent.

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