Food inflation shot-up to 16.90 per cent as of June 12 on higher prices of pulses, vegetables and milk, but any immediate tightening of money supply by the RBI to arrest the rate or price rise appears unlikely.
The annual rate of price rise of food items in the previous week ending June 5 was 16.12 per cent.
Year-on-year, pulses turned dearer by 34.14 per cent, while milk cost 21.12 per cent more. However, prices of potatoes and onions were down by 37 per cent and 22 per cent, respectively.
Food inflation has pushed core inflation into double digits (provisionally 10.16 per cent in May), prompting speculation that the Reserve Bank would tighten monetary policy to temper consumer spending.
“Inflation rate has reached uncomfortable levels. Therefore, some action is called for. It is for the Reserve Bank to decide on the timing. But, some action is called for,” Prime Minister’s Economic Affairs Committee chairman, Mr C. Rangarajan, had said earlier this week, setting off speculation that action could come before the Bank’s July 27 scheduled policy review.
The finance minister, Mr Pranab Mukherjee, too had dropped broad hints that there could be policy action by RBI, saying: “So far as the monetary part is concerned, the Reserve Bank will look into it.” However, economists indicated no such immediate action was warranted as the index was almost unchanged.
“There is no trend ... anxiety is still there. Though there is change in the composition, index as a whole is at the same level,” the chief statistician of India, Mr Pronab Sen, said. Food inflation has been above the 16 per cent mark for nine straight weeks.
“Food inflation will coming down post July,” Crisil economist, Mr D. K. Joshi said, and expects RBI to increase its key policy rates by 25 basis points to check inflation. He and Mr Sen are of the view that inflation is heavily dependent on the monsoons.