Food prices rise for 4th week running

Food prices rise for 4th week running

New Delhi: India’s food inflation rose for the fourth straight week in early February, heightening worries that it was driving up headline inflation past official forecasts and increasing the chance of the central bank pushing up rates.

The food price index rose 17.97% in the 12 months to 6 February, higher than an annual rise of 17.94% in the previous week, data released on Thursday showed.

The fuel price index rose an annual 9.89% in the same week, down from a rise of 10.4% on year the previous week.

A persistent rise in food and fuel prices along with a pick up in manufacturing prices are expected to push headline inflation from 8.56% in January to 10% by March, according to analysts and chief statistician Pronab Sen.

The wholesale price inflation has already leapt over the central bank’s revised end-March inflation forecast of 8.5%.

Inflation in manufacturing picked up to 6.55% from about 5% in December, a sign that inflationary pressures were spreading to other sectors of the economy.

“I do not expect headline inflation to come down near term," said Kevin Grice, an economist with Capital Economics in London.

“Base effects should continue to work through, food price pressures will probably stay high for a time while price pressures from the rapid economic upswing will continue to come through too."

A relentless build-up in price pressure is also putting pressure on the Reserve Bank of India (RBI) to take sterner measures like raising rates ahead of its April policy review.

The RBI is widely expected to raise borrowing rates at its April review after surprising markets with a bigger-than-expected rise in banks’ cash reserve requirements in January.

On Wednesday, Union agriculture minister Sharad Pawar said food prices have started to ease and will dip further next month, while finance minister Pranab Mukherjee said higher food prices continue to be a worry.

The government last month ordered the sale of stocked grain and extended duty-free sugar imports by nine months and remained hopeful that higher food supplies would moderate food prices.

However, the result on the ground has been slow, putting the Congress-led government under immense political pressure to find a solution to prevent any drift in its poor urban support base.