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Quick Edit | Skewflation is now over

Quick Edit | Skewflation is now over
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First Published: Mon, Mar 15 2010. 11 49 PM IST
Updated: Mon, Mar 15 2010. 11 49 PM IST
This fiscal year has been an unusual one as far as the inflation trend goes. Only twice before in recent history—1992-93 and 1996-97—have we seen a combination of double-digit food inflation and deflation in the rest of the economy. Every other major inflationary episode since 1971 has seen prices of food and non-food items shooting up in tandem. The Economic Survey released last month even came up with a new name for such lopsided price trends—skewflation.
The Wholesale Price Index data put out on Monday shows that food and non-food inflation are converging. The prices of manufactured items in February were 7.4% above their levels a year ago, a sure sign that deflation is a thing of the past. What’s more, the hike in excise duties that kicked in from March will aggravate this inflation subset.
Meanwhile, food prices are likely to decline in summer thanks to a good rabi crop. India’s unusual episode of skewflation is thus over. What we are now moving into is a period of widespread inflation that needs to be tackled with higher interest rates.
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First Published: Mon, Mar 15 2010. 11 49 PM IST