New Delhi: India’s food price inflation accelerated for the first time in four weeks, increasing pressure on the Reserve Bank of India (RBI) to raise interest rates this month.
An index measuring wholesale prices of lentils, rice, vegetables and other food articles, compiled by the commerce ministry, rose to 16.35% in the week ended 20 March from a year earlier after rising to 16.22% in the previous week, according to a statement in New Delhi on Thursday.
RBI governor D. Subbarao said last week that the contribution of food prices to the benchmark wholesale-price inflation rate has halved since November and is being replaced by costs of manufactured products.
Non-food manufacturing goods is the dominant contributor to price pressures, Prasanna Ananthasubramaniam, chief economist at Mumbai-based ICICI Securities Primary Dealership Ltd, had said in a 30 March report. He expects the country’s apex bank to raise rates by at least 0.25 percentage point this month.
“I expect overall inflation to be at 10.7% in March. To tame inflation, the Reserve Bank could take monetary tightening measures in the April policy by raising repo, reverse repo and cash reverse ratio by 25 basis points each,” HDFC Bank Ltd economist Jyotinder Kaur said.
The wholesale price inflation rate rose to 9.89% in February, with manufactured price inflation advancing to 7.42% from 1.6% in October.
On an annual basis, pulses became dearer by 31.55%, milk by 18.74% and wheat by 13.5%.
Food price inflation has slowed from a peak of 21.05% in November as farm production rose.
In the fuels segment, ATF (aviation turbine fuel) became dearer by 3%. Besides other factors, the rise in prices can also be attributed to the recent hike in excise duty on various goods and increased prices of petrol and diesel, pursuant to budgetary announcements in February.
Sugar output in India, the world’s biggest buyer of the commodity, will be higher than forecast as sugarcane yields improve, the Indian Sugar Mills Association said on 9 March. Production may total 16.8 million tonnes (mt) in the year ending 30 September, up from a previous estimate of 16 mt, the association said.
Last month, the central bank raised repo and reverse repo rates by 25 basis points to 5% and 3.5%, respectively, to check inflation from spreading to non-food items.
General inflation had already surpassed the banking regulator’s March-end projection of 8.5%.
Recently, Subbarao had also said that the central bank will continue its exit from monetary stimulus policy to check high inflation and ensure sustainable growth.