New Delhi: The country’s food inflation slowed to a three-month low as supplies of vegetables were boosted by the most recent harvest.
An index measuring wholesale prices of agricultural products including lentils, rice and vegetables rose 9.52% in the week ended 26 February from a year earlier, the commerce ministry said in a statement in New Delhi on Thursday. The gauge showed a 10.39% increase in the previous week.
India, which has increased its repurchase rate seven times in the past year to 6.5%, may face further pressure as rising oil costs threaten to spur inflation across Asia. While food and grain will move in a downward direction, the nation may be forced to raise fuel prices should crude remain above $100 a barrel for some time, C. Rangarajan, the Prime Minister’s chief economic adviser, said this week.
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“Food prices are showing a downward trend because of the base effect and due to increased supplies,” Jay Shankar, chief economist at Religare Capital Markets Ltd in Mumbai, said before the report. Still, he expects the central bank to raise rates by at least a quarter of a percentage point this month.
The decline in food prices was led by potatoes, which fell 9% in the week to 26 February from a year earlier and lentils, which declined 3.9%. All five economists surveyed by Bloomberg News expect the Reserve Bank of India to increase the repurchase rate to 6.75% on 17 March. India’s benchmark wholesale-price inflation probably slowed for a second month to 7.8% in February, according to the median estimate in a Bloomberg News survey of 15 economists.
“Uncertainty in the oil price is a serious issue which we shall have to address,” finance minister Pranab Mukherjee, said last week.
Oil climbed for the first time in three days in New York on Thursday as escalating violence in Libya, Africa’s third largest producer, renewed concern that supply disruptions may spread to the Middle East. Crude for April delivery gained as much as 59 cents to $104.97 in electronic trading on the New York Mercantile Exchange and was at $104.84 at 12.35pm Singapore time.
Graphic by Sandeep Bhatnagar/Mint