Food inflation at 9.13%, FM calls situation grave

Food inflation accelerated back to over nine per cent for the week ended September 17, after easing slightly to 8.84 per cent the week before, as prices of protein-based items continued to witness price pressure.

The rate of change of price rise in food items climbed to 9.13 per cent during the week, despite the high base effect of a 17.02 per cent rise in the corresponding week last year.

However, the normal monsoon and, hence, good farm production may ease food inflation to an extent, economists said.

Fuel inflation also rose to 14.69 per cent from 13.96 per cent, as petrol and aviation turbine fuel turned expensive after the rates were increased in the week. Finance minister Pranab Mukherjee said the rising food inflation was worrying. “Food inflation has gone up and it is perilously close to double digits...Food prices are an area of major and grave concern,” he said. However, the inflation in onions that was worrisome till two weeks before is showing a falling trend. It fell to 17.04 per cent for the week ended September 17, justifying the government’s move to lift a ban on exports of this item.(Click here for graph & table)

Fruit inflation also showed signs of easing, at 12.47 per cent versus 17.67 per cent last week. Eggs, meat and fish recorded a major jump in price rise at 13.17 per cent, from 9.28 per cent in the earlier week. Pulses also saw a major jump in inflation to 4.86 per cent from 1.49 per cent.

The first advance estimates indicated a drop of about 690,000 tonnes in pulses this kharif as compared to last year, a result of the drop in sowing from 1.15 million hectares last year to 1.14 mha. In fact, the Union agriculture ministry recently asked states to bring an additional million hectares under cultivation in the rabi season to offset the loss in kharif output.

The build in inflation for food items from March-end till September 17 stood at 10.16 per cent from 9.98 per cent a year before.

While many have criticised the Reserve Bank (RBI) for raising policy rates a 12th time, even when inflation seems a supply-side food problem, the Prime Minister’s Economic Advisory Council chairman, C Rangarajan, said there has to be definitive signs of food inflation falling before RBI reversed its tight monetary stance. “When food inflation persists for some time, it gets generalised,” he said.

However, inflation in non-food articles eased to 12.89 per cent. As mentioned earlier, it was the other way with fuel and power inflation, up to 14.91 per cent from 13.96 per cent in the previous week due to the Rs 3.14 a litre rise in petrol and a 2.5 per cent increase in aviation turbine fuel prices.