New Delhi: India’s food prices rose 13.39% in the 12 months to 24 October, highlighting concerns that the index could stay high despite government efforts to keep a lid on prices.
The fuel group index fell 6.2% from a year earlier, reflecting a comparison with last year’s spike in prices.
The normal weekly wholesale price index (WPI) was not released on Thursday. The Commerce and Industry Ministry said it would now release that data monthly from 12 November.
Last week, the government said the wholesale price inflation was 1.51% in the 12 months to 17 October.
India’s worst monsoon rains in nearly four decades and floods in parts of the country have hurt farm output and pushed up food prices, hindering a faster recovery of the economy.
“Bad summer crops will push up primary articles prices in the coming months,” said N R Bhanumurthy, economist at National Institute of Public Finance and Policy. “The shortfall in summer crop will not be covered by expected high growth in winter crops.”
The consumer price index (CPI), which has a heavy weight of food items, rose an annual 11.64% in September, lower than previous month’s level.
On Wednesday, a top policy adviser said food price inflation was still a concern but it should moderate by the end of this year.
The Union government last week increased the price at which it buys cane and rice from farmers to encourage higher domestic production, as it estimates an 18% decline in 2009-10 summer-sown grain output from a year earlier.
Last week, the Reserve Bank of India (RBI) raised its inflation forecast to 6.5% for the end of 2009-10 fiscal year in March with an upward bias but left its policy rates unchanged.
Rise in rates expected next year
Last week, the RBI laid the groundwork for a rise in interest rates by tightening credit to the commercial property sector and removed some of the emergency liquidity support measures that were extended to protect the economy from the global downturn.
After the policy review, a Reuters poll of 20 analysts found that nine of them expect an increase in the key repo rate by the end of January, when the RBI holds its next review, while all 20 expected a hike both in the repo and reverse repo rates by the end of April.
On Tuesday, Union finance minister Pranab Mukherjee said India will maintain its fiscal stimulus due to uncertainty arising from the poor monsoon and the global outlook.
Policymakers have favoured continuation of fiscal stimulus and an easy monetary stance to help sustain growth and aid economic recovery.
Last week, the central bank forecast the economy would expand 6% in 2009-10, below 6.5% predicted by the prime minister’s economic panel.
It grew 6.7% last year, slowing sharply from 9% or more between 2005-06 and 2007-08.