Inflation still in negative zone, but food stays on hot plate

Inflation still in negative zone, but food stays on hot plate
The Economic Times, August 07, 2009, Page 9

Our Bureau NEW DELHI

GOVERNMENT data showed on Thursday that the annual rate of inflation for all commodities stayed negative for the eighth straight week, but prices of food items continued to surge, signalling political concern for the Centre and three states preparing for assembly elections in a few months. Maharashtra is facing polls in October-November, while Haryana, which is supposed to go to polls next year is likely to advance it to this yearend. Jharkhand, now under President’s rule, is also likely to go to polls later this year.

As per the latest official data, annual inflation based on the wholesale price index (WPI) stood at -1.58% for the week ended July 25, against 12.53% a year ago. The negative inflation is, however, no consolation for consumers as inflation in food articles is almost in double digits—9.7% for the week ended July 25. The sharp run-up in prices of food articles, which were up 0.8% in the week under consideration, does not adequately reflect in the WPI due to its low weight in the index.

A negative rate of annual inflation offers the government little comfort when prices, particularly of food, go up week after week, as was evident from finance minister Pranab Mukherjee’s statement in Parliament on Thursday. “The government is responsible... the government is responsive. We are sensitive to it (price rise) ...as and when appropriate policy measures are needed, they will be taken,” Mr Mukherjee said. The minister said vegetable and milk prices have increased due to erratic monsoon.

India’s chief statistician Pronab Sen told ET that rising food prices have more to do with speculation at this stage than a crop failure. “Before the harvest, a lot of speculation activity takes place, driving up prices. We cannot say as yet that crops are failing...There is no real threat to economic growth this fiscal (on account of any disappointing harvest),” said Mr Sen.

At the wholesale level, prices are up 19% for pulses, 26% for vegetables and 11.3% for cereals compared to last year levels. At the retail level the increase has been sharper.