Inflation inches up to 0.56%
The Economic Times, May 1, 2009, Page 11
Our Bureau NEW DELHI
INFLATION edged up to a seven-week high of 0.56% for the week to April 18, defying expectations of a drop towards zero, with data once again highlighting the persistent problem of stubbornly high food prices amid rigidities in the farm sector.
Economists said this upward movement in the inflation rate is an “unexpected surprise”, and forecasted that rising prices of food items will become a major concern in the months to come. Although headline inflation, as m
easured by the wholesale price index, has come down to near-zero levels from a peak of near 13% last August, annual inflation rates for key food items such as sugar, vegetables, cereals and pulses remain in double digits. Overall food price inflation, which includes these items and more, rose to 7.39% for the week to April 18 from 6.85% the week before, but off the 10-year high of 11.63% seen in early January.
The rising food index reflects a deeper and longerterm problem in the agriculture sector, said HDFC Bank chief economist Abheek Barua, adding that if the inflation in food items is not addressed now, it could spill over to prices of manufacturing items. Analysts expect food prices to rise further in the short-to-medium term, lifted by the increase in rates at which government agencies buy food grains, a projected decline in global cereal production, and low credit availability to the farm sector.
Policymakers say lowering minimum support prices was not an option for the ruling coalition or for the new government that will be voted to power, as it will lead to resentment among farmers and could trigger social unrest.
Experts say soaring food prices could be tamed by releasing the government’s buffer stock of grains and by resorting to import of items like sugar.
“We have had four years of reasonably good rainfall and hence good growth in agriculture. Our silos are overflowing. So, this year even if rains deviate a little bit from the normal in terms of its timeliness and distribution, India should be able to tide over this eventuality without much problem,” said Ashok Gulati, director in Asia for the International Food Policy Research Institute.
Minerals and metals became dearer during the week, suggesting a revival in demand for industrial inputs and making manufactured items costlier for the eighth straight week. But analysts said a convincing trend in this area would emerge only over the coming weeks.
WPI inflation is nevertheless expected to hit sub-zero levels in the coming weeks because of the high base effect.
The Economic Times, May 1, 2009, Page 11
Our Bureau NEW DELHI
INFLATION edged up to a seven-week high of 0.56% for the week to April 18, defying expectations of a drop towards zero, with data once again highlighting the persistent problem of stubbornly high food prices amid rigidities in the farm sector.
Economists said this upward movement in the inflation rate is an “unexpected surprise”, and forecasted that rising prices of food items will become a major concern in the months to come. Although headline inflation, as m
easured by the wholesale price index, has come down to near-zero levels from a peak of near 13% last August, annual inflation rates for key food items such as sugar, vegetables, cereals and pulses remain in double digits. Overall food price inflation, which includes these items and more, rose to 7.39% for the week to April 18 from 6.85% the week before, but off the 10-year high of 11.63% seen in early January.The rising food index reflects a deeper and longerterm problem in the agriculture sector, said HDFC Bank chief economist Abheek Barua, adding that if the inflation in food items is not addressed now, it could spill over to prices of manufacturing items. Analysts expect food prices to rise further in the short-to-medium term, lifted by the increase in rates at which government agencies buy food grains, a projected decline in global cereal production, and low credit availability to the farm sector.
Policymakers say lowering minimum support prices was not an option for the ruling coalition or for the new government that will be voted to power, as it will lead to resentment among farmers and could trigger social unrest.
Experts say soaring food prices could be tamed by releasing the government’s buffer stock of grains and by resorting to import of items like sugar.
“We have had four years of reasonably good rainfall and hence good growth in agriculture. Our silos are overflowing. So, this year even if rains deviate a little bit from the normal in terms of its timeliness and distribution, India should be able to tide over this eventuality without much problem,” said Ashok Gulati, director in Asia for the International Food Policy Research Institute.
Minerals and metals became dearer during the week, suggesting a revival in demand for industrial inputs and making manufactured items costlier for the eighth straight week. But analysts said a convincing trend in this area would emerge only over the coming weeks.
WPI inflation is nevertheless expected to hit sub-zero levels in the coming weeks because of the high base effect.
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