Rising prices push food inflation up to 14.6 per cent

The continued rise of food prices at a rate of 0.9 per cent from last week translated to further inflation of the economy this week,leading to a bump in the annual inflation rate from (-)1.71 to (-)1.51. Although the cost of some fruits and vegetables had led to constant inflation in recent months,the rate continued to increase despite a marginal dip in vegetable prices this week,leading experts to express their concern over the ever-inflating cost of cereals,which take longer to recover from a spike in prices. Food inflation rose to 14.55 per cent in the first week of November fuelled by higher prices of staple items like potatoes,onions and pulses. On a weekly basis,inflation rose 0.87 percentage points from 13.68 per cent. The cost of vegetables increased by 0.2 points during the last week while cereals bumped up by 2.3 points resulting in the primary article increase of 2.2 points. The increase in cereals and grains was led by higher prices of urad by 9 per cent,moong 4 per cent and condiments,spices,barely,wheat and bajra by 3 per cent each.

“Fruit and vegetable prices will correct quickly,more worries are in cereals where high inflation continues,” said DK Joshi,Crisil’s chief economist. “The prospect of them coming down in the near future are not there.” With one eye constantly on the rising cost of food,experts are keeping watch on the performance of the rabi crop which,they hope,will lead to a reduction in food prices and the rate of inflation around March,Joshi said. However prices will continue to bump until there is clarity on the crop’s performance,despite optimism in its product.

“Unless you know how the rabi is going to fare,it’s difficult to tell when on many of these numbers; there’s great pressure while we wait,” he said. “I think the wholesale price index (WPI) will touch 5 per cent this year.”

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Inlfation may hit recovery: OECD

New Delhi: With inflationary pressures building up at the initial stages of recovery in the domestic economy,choosing the right time for withdrawal of the fiscal and monetary stimulus remains a major challenge for the policymakers,the OECD said on Thursday. Projecting a 7.3 per cent growth in 2010 and 7.6 per cent in 2011,inflation is expected to remain high,the OECD said in its India economic outlook report. PTI