Food inflation surged ahead to breach the psychological double-digit barrier at 10.60 per cent for the week ended October 8 against 9.32 per cent in the previous week, leaving no one in doubt that the Reserve Bank of India (RBI) will continue with its hawkish monetary policy stance on October 25. More disturbing is the fact that the fresh spurt in WPI (wholesale price index)-based food inflation does not suffer from the statistical anomaly of base effect as the food price spiral during the same week last year was also at a high of 15.72 per cent.
The rising trend does not augur well either for home and auto loan borrowers or for the government and the apex bank which has failed to anchor inflationary expectations despite gradual hikes in key policy rates for a dozen times since March last year. What remains to be seen — and what India Inc. may be apprehensive about — is whether the RBI sticks to a routine hike of 25 basis points in the repo rate or adopts a more hawkish stance of 50 basis points during its second quarter monetary policy review.
In keeping with the RBI's projection of headline inflation peaking till December before tapering down to about 7 per cent by March 2012, the contribution of the food basket has been a renewed surge in prices during the week. Prices of fruits and vegetables soared, with vegetables turning dearer by 17.59 per cent on a year-on-year basis while fruits also cost 12.39 per cent more.
To add to the common man's woes, milk prices went up by 10.80 per cent and eggs, meat and fish even higher by 14.10 per cent. Even pulses and cereals, which had witnessed a decline in recent weeks, turned more expensive by 7.42 per cent and 4.73 per cent respectively.
Commenting on the WPI data on food inflation which has surged despite a normal monsoon and a good harvest, Prime Minister's Economic Advisory Council Chairman C. Rangarajan expressed concern but exuded confidence that prices would decline in the coming months. “I am concerned [over high food prices] … I do believe that food inflation will come down... I believe that the monsoon has an effect on the availability of foodgrains which you will see in the months ahead,” he said at the Economic Editors' Conference here.
Keywords: Indian Economy, Food inflation, Foodgrains, PDS
Inflation, has been a persistent problem since quite a while.Though the pundits keep mentioning the proposed fdi in retail, as though it would totally quash the inflation, it remains to be seen as the consensus is yet evolving.In the mean time there needs to be an informed debate on this issue as it has already been shown that economic growth also contributes in ways to the problem of inflation.India with its growth targets should get used to this inflation as long it is kept in the single digits.Because even dietary preferences have changed.Cold chains do reduce inflation but not totally.Along with hiking interest rates there is not much that R.B.I can do much.
It's not still clear how the government is going to control this swelling evil. The major reasons behind this surging inflation are supply bottleneck and rising commodity prices at global level. How RBI alone can fight the forces which are beyond its coverage area? The need of hour is strong and reformatory steps. On one side, the BPL line has been reduced to Rs.32/Rs.26 per day spending, and other side continues shrinkig purchasing power has amplified the grieves of common man.
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