Food inflation shoots up on costlier cereals, fruits
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Sept. 9: Food inflation, which measures the pace of price rise, went up to 11.47 per cent for the week ending on August 28 due to high prices of cereals, fruits and milk. The index was at 10.86 per cent in the previous week.
“I would expect the rate of food inflation to start moderating by the first week of October. What I expect in October is moderation in rate of inflation, which will be due to higher base effect and somewhat a better crop,” said Mr Siddharth Shankar, the director of KASSA.
The Planning Commi-ssion deputy chairman, Dr Montek Singh Ahluwalia, said inflationary pressure would remain in the economy for some time now. “Inflationary pressures will not decline immediately, but will be down by December,” he said. In 2010, food inflation has been in single-digit only for two weeks in July. The overall inflation was at 9.97 per cent in July, after holding in double digits for five straight months until June.
With growth nearly back on track, RBI has shifted its focus from providing stimulus to the industry to containing high inflation. High food prices raised fears about a further tightening of interest rates by RBI to stop a spill-over effect on other sectors. However, Mr Shankar said that RBI is unlikely to go for an aggressive tightening. “I feel it would be difficult for RBI to tighten policy rates very aggressively in view of the global economic scenario. This could affect the growth prospects of the economy. I think more important for RBI is the liquidity management in the economy.” he added.
The RBI is scheduled to hold a mid-quarterly policy review on September 16. The Prime Minister, Dr Manmohan Singh, had on Wednesday expressed hope that inflation would come down in the coming months.
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