Food inflation rose to 16.4 per cent for the week ending May 1. This has reversed the downward trend seen over the last two weeks. This is mainly due to the high prices of fruits and vegetables.
Inflation for the last month was 16.04 per cent.
“There is an urgent need to bring down inflation. Monetary policy alone will not solve the issue of high food inflation, as there are supply side factors as well,” said CII president, Mr Hari S. Bhartia.
The finance minister, Mr Pranab Mukherjee, had expressed concerns over the high inflation on Wednesday.
Food inflation is high at a time when the rabi crop has begun entering the market.
Therefore it will not address the issue of supply side constraints of all the commodities. The food inflation situation will become clearer when we have good picture about the monsoon,” said rating agency Crisil chief economist, Mr D. K. Joshi.
He said there will be a sharp dip in food inflation only in the second half of the financial year in case of a normal monsoon.
The Indian Meteorological Department has predicted a normal monsoon this year, which has raised hopes that the food prices will be controlled.
The food prices were high as last year parts of country witnessed a severe drought in decades.
Now with industrial growth back on track, the RBI is likely to shift its focus to controlling the high inflation.
The overall inflation was at a 17-month high of 9.90 per cent in March.
Due to this the RBI is expected to further tighten the monetary policy in the coming days.
The RBI in its annual monetary policy last month had raised the key inter-bank lending and borrowing rates and cash reserve ratio by 25 basis points each.
“The RBI is expected to raise interest rates 25 basis points at every policy review said,” Mr Joshi adds.