Reserve Bank of India Governor D. Subbarao on Tuesday said primary food articles inflation had risen again sharply. Non-food articles inflation and fuel inflation were already at elevated levels. Non-food manufacturing inflation had remained sticky. There were signs of food and fuel price increases spilling over into generalised inflation.

There had been a sharp rise in global commodity prices, which had heightened upside risks to domestic inflation, said Dr. Subbarao. According to him, many emerging market economies have been facing strong inflationary pressures, reflecting higher international commodity prices and rising domestic demand pressures. Significantly, food, energy and commodity prices are widely expected to harden during 2011, driven by a combination of supply constraints and rising global demand, as the advanced economies consolidate their recovery.

“This suggests that inflation could be a global concern in 2011,”

Dr. Subbarao warned

However, he said, growth had moved close to its pre-crisis trajectory even in the face of an uncertain global recovery. He also felt that the uncertainty with regard to global recovery had reduced.

Even though the RBI Governor felt that the current spike in food prices was expected to be transitory, he said, “Inflation stemming from structural demand-supply mismatches in several non-cereal food items such as pulses, oilseeds, eggs, fish, meat and milk is likely to persist till supply response kicks in.” Non-food manufacturing inflation also remained above its medium-term trend of 4 per cent.

Keywords: Monetary policy

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