No statistical anomaly of base effect
Having breached the psychological barrier, food inflation raced ahead to 11.43 per cent for the week ended October 15 from 10.60 per cent in the previous week owing to a relentless surge in prices of vegetables, fruits, milk and protein-rich items.
The WPI (Wholesale Price Index) on food inflation released here on Thursday shows that while vegetables were 25 per cent dearer on a year-on-year basis, fruits turned more expensive by 11.96 per cent and milk by 10.85 per cent. Alongside, eggs, meat and fish were also costlier by 12.82 per cent.
What is hurting the common man all the more is that this fresh bout of double-digit inflation is over and above the 14.20 per cent spurt witnessed during the same week in October, 2010. In effect, there is no statistical anomaly of base effect in play in the current surge in prices which is very close to the high of 11.53 per cent recorded for the week ended April 9 this year.
More disconcerting for the authorities is the fact that edibles such as pulses and cereals — prices of which had eased in recent months — have started to become more expensive and turned dearer by 9.06 per cent and 4.62 per cent, respectively, on a yearly basis.
Items which tended to cost less on an annual basis, however, were onions with their prices declining by 18.93 per cent while wheat and potatoes also turned cheaper by 0.95 per cent and 0.45 per cent, respectively.
In a way, the spurt in food inflation, which has a significant share in the overall price spiral, vindicates the rate hike and the policy stance taken by the Reserve Bank of India (RBI). In its annual review, the apex bank had estimated headline inflation to remain high till December this year before tapering down to about 7 per cent by the end of the fiscal year in March, 2012.
Noting that real wage inflation has extended into the first quarter of the current fiscal, the RBI, in its second quarter review said: “Food inflation is likely to stay elevated due to demand-supply mismatches in non-cereals and large MSP [Minimum Support Price] revisions.”
Significantly, headline inflation, which also accounts for the price surge in manufactured items, has hovered above 9 per cent since December, 2010 and stood pegged at 9.72 per cent in September this year.