Food inflation falls to single digit

Food inflation fell sharply to single digit at 9.01 percent for the week ended November 12 even as prices of most agricultural items, barring potatoes, onions and wheat, continued to rise, on an annual basis.

Food inflation, as measured by the Wholesale Price Index (WPI), was 10.63 percent in the previous week.

The rate of price rise in food items stood at 11.38 percent in the corresponding week of the previous year.

According to the data released by the government today, onions became cheaper by 32.85 percent year-on-year, while potato prices were down by 7.23. Price of wheat also fell by 3.09 percent.

However, all other food items became expensive on an annual basis during the week under review.

Vegetables became 17.66 percent costlier, while pulses grew dearer by 14.28 percent, milk by 10.46 percent and eggs, meat and fish by 11.98 percent.

Fruits also became 4.59 percent more expensive on an annual basis, while cereal prices were up 2.86 percent.

Inflation in the overall primary articles category stood at 9.08 percent during the week ended November 12, as against 10.39 percent in the previous week. Primary articles have over 20 percent weight in the wholesale price index.

Inflation in non-food articles, including fibres, oilseeds and minerals, was recorded at 4.05 percent during the week under review, as against 5.33 percent in the week ended November 5.

Fuel and power inflation stood at 15.49 percent during the week ended November 12, the same as in the previous week.

Sustained high food inflation warrants monetary steps - RBI

The Reserve Bank of India (RBI) chief Duvvuri Subbarao on Tuesday said monetary steps may be warranted to curb inflation expectations in face of sustained high food inflation, flagging the need to revisit politically sensitive subsidy schemes in agriculture.

RBI Governor also said that the government's food for work programme and proposed food subsidy bill will further raise fiscal deficit and inflationary pressures.

Food inflation has been stubbornly high over the last few years in India, inspite of record foodgrain production and robust buffer stocks.

The RBI has already raised rates 13 times since early March 2010 to clamp down on stubborn inflation, largely driven by high food prices.

"The direct role of monetary policy in combating food price pressures is limited, but in the face of sustained high food inflation, monetary action may still be warranted to anchor inflation expectations," Subbarao said in a speech at a conference in the south-eastern city of Hyderabad.

The comments, hawkish as they seem, may not warrant a change in RBI's stance which has signalled a likely pause in rate hikes in the December policy and may be extend it, if inflation falls in line with the RBI's projected trajectory.

The central bank, in a bid to ease tight banking system liquidity, will buyback bands upto 100 billion rupees ($1.9 billion) on Thursday.

Subbarao said large increases in the minimum support prices on food grains by the government to farmers was one of the reasons driving food inflation.

"There is a case for revisiting subsidy regime for a number of reasons, including the pressure it exerts on food inflation."

His criticism comes on the first day of a parliamentary session in which the government will propose doubling food subsidies to about $24 billion in an effort to bolster its support among millions of poor Indians ahead of state elections.

Agricultural subsidies are a politically volatile issue as farmers constitute a large votebank for political parties.

The central bank chief also said the supply chain of farm products is a major source of price pressures and the cross-country experience on the benefits of multi-brand foreign direct investment on inflation is "ambiguous".

India's cabinet may decide to allow chains such as the world's largest retailer Wal-Mart Stores Inc (WMT) to operate in the country with a majority stake under strict local sourcing rules, a senior government source told Reuters.

A draft cabinet note suggesting so-called multi-brand retail foreign firms could hold up to 51 percent ownership has already been reviewed, a senior government source said on Friday.

Subbarao also said that the government's proposed food subsidy bill is another major potential source of inflationary pressure.

"The higher food subsidy burden on the budget will raise the fiscal deficit, exacerbating macro level inflationary pressures."

Estimates suggest that 68 per cent of the country's 1.2 billion population will get a legal entitlement for food grains after the bill is enacted, which will significantly raise annual grain procurement demand even as the available marketed surplus would not increase in the same proportion.

The governor made it clear "a lasting solution to food price pressures lies in a supply response" from the government.

Data released last week showed India's food price index rose 10.63 percent and the fuel price index climbed 15.49 percent in the year to Nov. 5.

Food inflation jumps to 11.43%

Food inflation shot up to 11.43 per cent for the week ended October 15 on the back of costlier vegetables, fruits, milk and protein-based items.

Food inflation, as measured by Wholesale Price Index (WPI), stood at 10.60 per cent in the previous week.

The rate of price rise of food items was 14.20 per cent in the corresponding week of 2010.

As per data released by the government today, vegetables became 25 per cent costlier, year-on-year basis. Similarly, Fruits grew dearer by 11.96 per cent, milk by 10.85 per cent and eggs, meat and fish by 12.82 per cent.

Pulses also became dearer by 9.06 per cent and cereal prices were up 4.62 per cent year-on-year.

However, onions became 18.93 cheaper. Wheat prices were also down 0.95, and potatoes by 0.45 per cent during the week under review.

As for weekly comparison, inflation in the overall primary articles category was 11.75 per cent for the week ended October 15, compared to 11.18 per cent in the previous week. Primary articles have over 20 per cent weight in WPI.

Food Inflation slips to 9.32% for week ended Oct 1

India's food inflation slipped marginally to 9.32 percent for the week ended October 1 as compared to 9.41 percent in the previous week, official data showed Thrusday.

Earlier Finance Minister Pranab Mukherjee had said that acceleration in the prices of food and other essential commodities remained a matter of concern and the government was constantly in touch with the Reserve Bank of India to bring down inflation to a comfortable level.

"Inflation is definitely a matter of concern. We shall have to see how to bring it down to a moderate level. I am constantly in touch with the RBI and other experts in this area," Mukherjee had said.

Inflation has remained stubbornly high near double-digit since January 2010. The headline inflation based on the wholesale price index was recorded at 9.78 percent in August, according to the latest official data.

The stubbornly high inflation might prompt the RBI to hike policy rates again. The central bank has hiked key policy rates 12th time since January 2010.

RBI may hike rates as food inflation surges to 10.05%

After a gap of over five months, food inflation entered the double-digit zone at 10.05 per cent for the week ended August 20, with Finance Minister Pranab Mukherjee describing the trend as "disturbing" and experts saying RBI may go in for another rate hike.

The weekly food inflation, measured by Wholesale Price Index (WPI), went up from 9.80 per cent on account of expensive onion, vegetables, fruits and protein-based items.

The last time food inflation crossed 10 per cent was in the week ended March 12.

"Food inflation has gone up... This is really disturbing. We shall have to ensure and remove the supply constraints on food items," Mukherjee told reporters here.

As per the official data released today, prices of onion soared by 57.01 per cent year-on-year and potato rose by 13.31 per cent during the week under review.

Fruits became dearer by 21.58 per cent and vegetables overall by 15.78 on an annual basis.

Prices of protein rich items, egg, meat and fish were up 12.62 per cent, while milk and cereals became dearer by 9.22 per cent and 4.64 per cent respectively.

Attributing the jump in food inflation to seasonal factors, experts opined it could again force the Reserve Bank to hike interest rate during its mid-quarter monetary policy review scheduled on September 16.

"With headline inflation remaining well above 9 per cent, we expect RBI to raise key policy rates by 25 basis points at its next mid-quarterly review," Crisil chief economist D K Joshi said.

Food items constitutes about 14 per cent to the WPI.