Higher prices of pulses, milk and vegetables pushed food inflation up yet again to16.90 per cent for the week ended June 12 from 16.12 per cent in the previous week. And with no discernible trend on the movement of the price spiral as yet in the wake of a weak monsoon, divergent views are being expressed on whether the Reserve Bank of India should take any immediate money tightening steps to contain the inflationary pressures.
On a year-on-year basis, even as potato and onion prices were lower by 37 per cent and 22 per cent respectively, pulses still ruled dearer by 34.14 per cent, while milk prices were higher by 21.12 per cent. Even on a weekly basis, vegetables were 8.06 per cent costlier while spices and condiment prices were up 3 per cent. Pulses (urad and moong) and tea were also higher by one per cent each.
The rising food inflation, in turn, has already started seeping into other sectors, such as manufacturing, to push the WPI (wholesale price index)-based headline inflation into double digits, pegged provisionally at 10.16 per cent in May.
Earlier this month, indicating the need for monetary tightening so as to curb consumer spending, Prime Minister's Economic Advisory Council (PMEAC) Chairman C. Rangarajan had said: “Inflation rate has reached uncomfortable levels. Therefore, some action is called for. It is for the Reserve Bank to decide on the timing. But, some action is called for…”
Finance Minister Pranab Mukherjee also had given similar indications of some policy action by the apex bank. “So far as the monetary part is concerned, the Reserve Bank will look into it,” he had said. However, a divergent opinion came for Chief Statistician of India Pronab Sen who felt that no immediate steps were necessary in the absence of a definite trend.
“There is no trend ... anxiety is still there. Though there is change in the composition, index as a whole is at the same level,” he said.
In the event, although food inflation has remained at above 16 per cent for nine weeks in a row, the general expectation is that a good monsoon would have a softening effect on the price spiral.
