Food inflation surged to a one- month high of 8.55% for the week ended 14 May, driven largely by the spiralling cost of fruits, and experts have warned of the recent petrol price hike further fuelling the rate of price rise.
The firming up of food inflation, coupled with rising prices of manufactured items, may prompt the Reserve Bank of India (RBI) to take more steps to tackle price rise at its mid-quarterly monetary policy review next month.
Food inflation rose by a hefty 1.08 percentage points during the week under review from 7.47% in the previous week, official data showed. On an annual basis, prices of primary articles went up by 23.22%.
"The non-food articles category is already under pressure. Going forward as food inflation moderates, fuel inflation will see an upward move," Crisil principal economist D. K. Joshi said.
On an annual basis, fuel and power inflation stood at 12.11% during the week ended 14 May.
During the week ended 14 May, prices of fruits rose by 32.37%, milk by 5.53% and eggs, meat and fish by 8.26%.
In addition, cereals became costlier by 5.03% year-on-year and prices of onions were up by 8.32%, official data released here showed.
However, prices of vegetables and pulses declined by 1.46% and 9.49%, respectively. Also, wheat became cheaper by 0.30% on an annual basis.
Experts said even as inflation in the food articles category is showing signs of a decline, fuel inflation will add to the woes of the government in the coming days when the recent petrol price hike is factored in.
Oil marketing companies hiked petrol prices by Rs5 per litre with effect from 14 May midnight, the effects of which will be visible in the food inflation data for the week ended 21 May.
"Inflation is expected to rise further sometime in July-August when I expect the fuel & power inflation to rise. We may see a hike in diesel prices in the coming 6-8 weeks and that will add to inflationary pressures," KASSA director Siddharth Shankar said.
Among the other food items, on an annual basis, prices of rice rose by 2.63% and potatoes by 0.17%.
Commenting on the inflation numbers, Deloitte Haskins & Sells director Anis Chakravarty said, "Pricing pressures have not eased inspite of the determined rate hikes by the RBI."
Food inflation remained in double digits for most of 2010, before showing signs of moderation from March 2011.
On the other hand, prices of non-food primary articles were up 23.22% during the week under review. Fibres became dearer by almost 61%, while minerals were up 11.78%.
The government and Reserve Bank had said that in the months to come, inflationary pressure would be more from core (non-food) items on account of high global prices of commodities, particularly crude.
"I expect the liquidity situation to tighten in the coming months something that will adversely affect the industry," Shankar said.
The RBI has already hiked policy rates nine times since March 2010, to check spiralling prices.
Source: Mint.
Vivek Agrawal
Summer Intern-Fundamental Analysis
DENIP Consultants Pvt. Ltd.
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