Dec inflation rises to 8.43%

Wholesale inflation rose to 8.43 per cent in December, primarily due to steep increases in prices of food articles, particularly vegetables and other perishables, during the month.

The headline inflation, as measured by the Wholesale Price Index (WPI), stood at 7.48 per cent in the previous month and at 6.92 per cent in December 2009. Adding to the concerns over inflation, the inflation rate for October 2011 was revised upwards to 9.12 per cent from an earlier estimate of 8.58 per cent.

Overall inflation came down to single digits in August after being in double digits for five months. However, it had started moderating trend since April, primarily aided by base effect and moderating prices of food prices, particularly of foodgrains.

Food inflation started a steep rise in November, as prices of vegetables, particularly onions and other perishables, shot up fuelling inflationary expectations.

Wholesale food inflation for the week ended January 1 moderated to 16.91 per cent from a 23-week high of 18.32 per cent in its previous week.

“Food inflation at this level is not acceptable and we are trying our best to control it along with cooperation of the state governments,” said Finance Minister Pranab Mukherjee, a day after the government formed an inter-ministerial group headed by Chief Economic Advisor Kaushik Basu to monitor prices on a regular basis.

Mukherjee further said he would meet state finance ministers on January 19 to discuss the issue of price rise, among other things.

Inflation rate for primary articles stood at 16.46 per cent as against 17.96 per cent last year and 13 per cent in the previous month. Food articles registered a steep rise in inflation rate to 13.55 per cent in December from 9.41 per cent in the previous month and 20.76 per cent last year.

Inflation rate for manufactured products, however, stayed at a comfortable level of 4.46 per cent in the month, marginally down from 4.56 per cent in the previous month and 3.61 per cent during the corresponding period in 2009.

“Food inflation has not yet spilt over to non-food inflation. Indications are there that this has not happened. However, if food inflation persists at such high levels, the risk cannot be ruled out,” said Chief Statistician of India T C A Anant.

With food inflation showing no signs of slowing down, overall inflation rate is expected to remain in high single digits in the coming month. However, a high statistical base effect and increased supply conditions are likely to cushion the rate going ahead. Rising fuel costs, among other factors, may see inflation going higher than the Reserve Bank of India’s (RBI) estimate of 5.5 per cent by March-end. “We expect inflation to stay stubbornly high for many reasons. Spike in manufacturers’ margins will pass on the cost to consumers. Second, vegetable prices are not rising as fast as they did in the last two months but they are not falling much, and diesel price hike is still pending,” said Sonal Varma and Ketaki Sharma, economists with Normura India, in a research note.

They further added that recent measures announced by the government such as crackdown on hoarding and import of onions may have some impact but “it is hard to tame prices, especially of perishable goods such as fruit and vegetables, which by their nature make it hard to either import or maintain sizable public stock.”