Costly food fuels inflation to 8.4%
Jan. 14: The pace of rise in prices accelerated in December 2010, with the wholesale price index (WPI)-based inflation jumping to 8.43 per cent. The actual figure could be higher because the inflation figure for October which was 8.58 per cent has been revised upwards substantially to 9.7per cent. Besides the consumer like you and I, do not buy in wholesale so prices in effect at the retail level are even higher.
The spurt in food prices mainly led to increase in the overall inflation. The 8.43 per cent may not look high but the fact is that food inflation which impacts the common man most was at 16.91 per cent for the week ended on January one.
“These represent the wholesales prices and doesn't report the way the cost of living is going up for the common man which is captured by consumer price index,” said Mr Partha Mukhopadhyay, economist and senior fellow at the Centre for Policy Research.
The finance minister, Mr Pranab Mukherjee, also admitted that food inflation was unacceptably high. “Food inflation at this level is not acceptable and we are trying our best to control it along with the co-operation of states.”
He said that he will discuss this issue with the finance ministers of the various states in his pre-budget meeting on January 19.
The finance minister said inflation is an economic phenomenon, which may have monetary factors behind it. It could be caused by the mismatch between demand and supply or the international scenario like crude prices, he said.
“You can help consumers, but providing subsidies...Is not helping inflation in the long run,” he said.
Citi India in its research report said that inflation is likely to remain high at 6.5 to 7 per cent in the next fiscal also.
“Measures taken by the government (including anti-hoarding and banning exports among others) and the favourable base effect could result in a moderation in inflation to 7.0-7.5 per cent levels by March. However, even as prices could be moderate once the supply shocks ease, the composition of food inflation reveals that persistently high prices appear to have a structural as well as cyclical component,” Citi India’s report added.
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