Inflation turns positive after 13 weeks

Inflation edged back into positive territory after 13 weeks at 0.12 per cent, driven by higher prices of essential food items and may rise further on the back of poor farm production.

The wholesale prices-based inflation rose 0.24 percentage points for the week ended September five against (-) 0.12 per cent a week before, despite a high base of 12.42 per cent a year ago.

Cost of essential items like fruits rose by an exorbitant 17.8 per cent on a weekly basis. Also, prices of poultry chicken rose by 16 per cent, spices by three per cent and some pulses by one to two per cent.

Inflation had been in negative territory for 13 straight weeks due to base effect. Prices of food items, which rose continuously during the period, may rise further on the back of poor rainfall and resultant reduction in farm output.

Terming the transition of inflation into positive territory as slightly faster than expected, Crisil Principal Economist D K Joshi said the major driver are the prices of items found in raw form (primary articles).

Both Finance Minister Pranab Mukherjee as well as Planning Commission Deputy Chairman Montek Singh Ahluwalia had earlier said that inflation would turn positive by September.

This has presented RBI with a dilemma on whether or not to tighten monetary stance, since economic growth has not fully revived.

RBI Governor D Subbarao had himself said, a couple of days ago, that this situation was indeed a dilemma.