Food inflation surges to 12.13%

India's food price index rose 12.13 per cent while the fuel price index climbed 10.74 per cent in the year to December 11, government data on Thursday showed.

In the prior week, annual food and fuel inflation stood at 9.46 per cent and 10.67 per cent respectively.

The primary articles price index was up 15.35 per cent in the latest week compared with an annual rise of 13.25 per cent a week earlier.

COMMENTARY:

RUPA REGE NITSURE, CHIEF ECONOMIST, BANK OF BARODA, MUMBAI:

"We were expecting this as unseasonal rains had damaged many kharif crops (summer-sown) and perishables. Recent hikes in petrol prices would also start impacting the inflation numbers.... overall cascading effects of all these factors will push inflation to around 7 per cent by end-March.

"With global crude prices above $90 a barrel, we will again have to raise petrol and diesel prices. These rates are significantly high for India to sustain and if oil remains at such elevated levels, inflation could rise by as much as 1.5 percentage points over the next quarter."

N.R. BHANUMURTHY, ECONOMIST, NATIONAL INSTITUTE OF PUBLIC

FINANCE AND POLICY, NEW DELHI:

"The full effect of the onion crisis is yet to play out.... The (farm) minister himself has said that onion prices are going to stay firm for 2-3 weeks."

"If you add crude which has crossed $90 a barrel to this mix (along with the rise in domestic food prices), it has a pass through effect and I don't see the RBI (Reserve Bank of India) achieving its end-March projection of 5.5 per cent for headline inflation. In fact, I don't see inflation easing below 6-6.5 per cent by March."

MARKET REACTION:

- The most-traded 8.13 per cent 2022 bond yield briefly edged up 2 basis points to 8.05 per cent.

- The partially convertible rupee was little changed at 45.01/02 per dollar after the weekly inflation data.

BACKGROUND:

- India's annual headline inflation in November eased to 7.48 per cent, the lowest level in a year, from 8.58 per cent in October.

- Food inflation as at December 4 stood at 9.46 per cent, accelerating for the second straight week after snapping a seven week easing trend.

- Onion prices, which have more than doubled in the past week due to a shortage caused by unusually heavy rain in growing areas, will put upward pressure on food inflation.

- High global crude prices of around $93 per barrel is expected to have a spiralling effect on headline inflation.

- India's headline inflation is not easing as fast as the central bank would like it to and upside risks remain, Subir Gokarn, a deputy governor at the Reserve Bank of India (RBI) said on Wednesday.