Much to the surprise of analysts and fresh concern for the government, food inflation surged yet again to double digits at 10.05 per cent for the week ended March 12 from 9.42 per cent in the previous week as prices of fruits, vegetables and protein-rich edibles continued to rule at higher levels.
Soaring prices
A close look at the wholesale price index (WPI) data reveals that while some solace can be drawn from the fact that food inflation during the like week in 2010 was more than double at 20.62 per cent, the flip side is that the current bout of rising prices is on the back of an inflationary spiral seen last year without any statistical ‘base effect' anomaly.
During the week, while vegetable prices rose by 11.20 per cent on a year-on-year basis, fruits remained dearer by 23.60 per cent and eggs, meat and fish continued to rule higher by 13.21 per cent.
Evidently, the sudden spike in food prices has been owing to demand-supply mismatches and such constraints cannot be tackled through monetary measures by the Reserve Bank of India (RBI).
According to HDFC Bank chief economist Abheek Barua, it is alarming that food inflation has surged to double digits. “We are again seeing a reversal on the part of food inflation, which is a cause of concern. The surge in prices could be because of supply-side disruptions,” he said.
However, the catch is that since food articles have a weight of more than 14 per cent in the WPI basket for headline inflation, its contribution in overall rise in prices is significant and the RBI may have to opt for hiking its key policy rates yet again during its monetary review due in May.
As per provisional figures, overall inflation stands pegged at 8.31 per cent in February this year.
Perhaps, in anticipation of a fresh surge in prices, the RBI has already upped its projection on overall inflation for the fiscal year ending March 31, 2011, to 8 per cent from 7 per cent estimated earlier. Putting further inflationary pressure in the weeks ahead could be soaring oil prices owing to uncertainty in West Asia and North Africa.
Already, the ongoing political turmoil in the Arab world, especially Libya, has led to a spike in crude oil prices in global markets.
“There would be a continuous increase in the prices of decontrolled [oil] products. Moreover, the prices of diesel could be hiked after elections in four states and one Union territory in the country,” Mr. Barua said.
As per the WPI data, inflation of non-food articles was up 26.78 per cent on a year-on-year basis.
While mineral prices went up by 12.35 per cent during the week, petrol turned dearer by 23.14 per cent.
