Higher food inflation upping overall inflation: RBI

Higher prices of foodstuff such as cereals and vegetables continue to put pressure on India's overall inflation rate, the Reserve Bank of India (RBI) said Monday.

Elevated food inflation, particularly in respect of cereals and vegetables, "sustained upside pressures on overall inflation," the RBI said in its mid-quarter review of the monetary policy.

"Headline WPI (wholesale price index) inflation eased for three months in succession with the May reading at 4.7 per cent, down from an average of 7.4 per cent in 2012-13. All constituent categories, barring food, have moderated. In the fuel category, coal and mineral oil prices declined, partly offsetting the upward revision in administered prices of electricity. Non-food manufactured products inflation too ebbed, driven by metal prices which fell for the eighth successive month in response to softening of global prices.

"Still elevated food inflation, particularly in respect of cereals and vegetables, sustained upside pressures on overall inflation. Retail inflation, as measured by the new combined (rural and urban) CPI (consumer price index), edged down from an average of 10.2 per cent last fiscal year to 9.3 per cent in May."

And as food inflation remains high, the inflation outlook will be influenced by concerted efforts to break this, it said.

"On the inflation front, easing commodity prices at the global level and weaker pricing power of corporates at the domestic level are having a softening influence. Given that food inflation remains high, the inflation outlook will be influenced by concerted efforts to break food inflation persistence.

"The inflation outlook going forward will be determined by suppressed inflation being released through revisions in administered prices, including the minimum support prices (MSP) as well as the recent depreciation of the rupee."