New Delhi: India’s wholesale food prices rose at the fastest pace in 11 years, making it more likely that the Reserve Bank of India (RBI) will raise borrowing costs to curb inflation.
An index of food articles compiled by the commerce ministry increased 19.95% in the week ended 5 December from a year earlier, following a 19.05% gain in the previous week. A measure of fuel and electricity prices rose 3.95%, the ministry said in a statement on Thursday.
Policymakers in Asia have started to exit monetary stimulus as the global economic recovery causes the focus to shift from reviving growth to fighting inflation.
Photo: Madhu Kapparath/Mint; Graphic: Sandeep Bhatnagar/Mint
Australia and Vietnam have already begun raising interest rates as inflation accelerates across Asia, with China’s consumer prices rising for the first time in 10 months in November.
“When growth is subdued, inflation can be ignored,” said Sonal Varma, a Mumbai-based economist at Nomura Holdings Inc, Japan’s largest brokerage. “However, with both growth and inflation surprising on the upside, we believe that a policy action is imminent,” she said.
India’s economy grew 7.9% in the three months to 30 September from a year earlier, the fastest pace in one-and-a-half years, giving policymakers room to shift their focus to the soaring food price inflation.
On Wednesday, opposition members of the Lok Sabha had accused the government of being ineffective in tackling soaring food prices and disrupted Parliament, forcing adjournment.
A panel of lawmakers said in a report presented to Parliament on Thursday that the government had failed to intervene in a timely manner to address the burning issue. The standing committee of finance demanded a probe into the surge in sugar prices and suggested developing a mechanism to provide food items directly to consumers to overcome hoarding.
India’s inflation is accelerating as the weakest monsoon since 1972 and floods in some parts of the country hurt farm output and caused shortages.
Potato prices more than doubled in the week ended 5 December from a year earlier, vegetable costs climbed 41.09%, the price of pulses rose 40.1% and wheat gained 13.9%, the report showed.
RBI is scheduled to review interest rates on 29 January.