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The increasing food prices are becoming a concern for everyone. The potato rates have shot up by more than 104% in last one year. Sugar rates have become dearer with 45% hike. Onions price rose by 35%, pulses by 23%, rice by 13% and milk by 10%. The prices of the processed food articles, used mainly by the affluents, also show a jump of 16% on a yearly basis.
However, the WPI rate has increased by only 1.21%. This hides the whopping increase in the year-on-year inflation in food items, primarily because of low weights given to food products in the WPI. On a sequential basis also, the prices of the food products remain to be a cause of worry. Onions with more than 24% inflation, potato rates up by more than 15%, fish prices increasing by 14%, moong dal rates more than 5% high and rice getting dearer with a hike of 3% have become unaffordable for many.
The continuous increase in the food price inflation has become a major problem for the government. The Economic Advisory Council of the Prime Minister has also expressed their concern over the situation. Producer price inflation is likely to jump in the next months as the statistical base effect gets disadvantageous and the fresh economic recovery push the demand for manufactured goods. The poor monsoon could further intensify the problem by adding to the woes of increasing food prices. According to PMEAC, inflation will continue to be somewhere around 6% by March 2010.
Interest rates
The recent recorded inflation data set is the last before the central bank’s meet on policy review on October 27. According to economists, the RBI is unlikely to introduce any change in the rates, as the economic recovery continues to be weak.
The RBI had cut interest rates 6 times between October 2008 and April 2009 to considerable lows to save the economy from the worst impact of the global meltdown since the time of 1930s. The central bank did not change the reverse repurchase rates to keep it at 3.25% and to hold the repurchase rate at 4.75%. The Hindu Business Line
October 22, 2009
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