Rising food prices break inflation fall
The Reserve Bank of India (RBI), in its monetary policy review announced earlier this week, had hinted that the central bank is no longer concerned about inflation. RBI governor Duvvuri Subbarao said WPI inflation would enter negative territory for a brief period, though it would move up to touch 4% by the end of the current fiscal.
“The wholesale price index may turn negative in the next few months, though that shouldn’t be interpreted as deflation as consumer price gains continue to run at near double-digits,” Mr Subbarao said while announcing the monetary policy on Tuesday.
Even though inflation no longer remains a worry, increase in prices of vegetables (2.6%), fruits (0.8%) and cereals (0.3%) continues to be a major worry for policy makers. Prices of vegetables had moved up by almost 25% in the week before, and the spike in prices of essential commodities is expected to play spoilsport for the ruling United Progressive Alliance coalition during the Lok Sabha elections.
Prices of manufactured items have also been moving up for the last one-and-a-half months. Textile products, chemicals and basic metals also became costlier over the week. The retail inflation is still ruling firm on the back of costlier food items. As per the latest available data, retail inflation measured in terms of consumer price index for industrial workers was 9.63% in February while the same for farm laborers was at 10.79%.
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