The rate of inflation inched up marginally to minus 1.53 per cent for the week ended August 8 from (-)1.74 per cent in the previous week following continued uptrend in food prices in the wake of an erratic and deficient monsoon in large parts of the country.
Even as the wholesale price index-based inflation continued to remain in the negative territory during the week as compared to 12.82 per cent in the like week a year-ago on account of the high base effect, the uptrend in price movement is in keeping with the Reserve Bank’s expectations.
It may be recalled that earlier this week, RBI Deputy Governor K. C. Chakrabarty had noted that the deficient monsoon was likely to spur inflationary pressures with food prices rising in the coming months on account of reduced kharif sowing. In any case, cereals such as rice and pulses are set to turn dearer as the government on Thursday announced hikes in the minimum support prices (MSP) for paddy by Rs. 100 a quintal and pulses by up to Rs. 240 a quintal, mainly to help farmers and induce higher kharif procure- ment.
On the liquidity front, with the spectre of drought likely to worsen the situation by way of further impacting food prices, the apex bank is expected to keep its key policy rates unchanged for some more time so as to contain the WPI inflation at the tolerable level of about 5-5.5 per cent by the end of this fiscal.
On a year-on-year basis, however, the rise in food prices has been much steeper, with vegetables turning more expensive by nearly 40 per cent, cereals by 11.6 per cent, pulses by 17.6 per cent and condiments and spices by 4.7 per cent.