Govt fails; food inflation surges at 14.44 pc

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Food inflation
New Delhi, Dec 30: Despite central government's assurance that food inflation will come down soon, result of food inflation showed some different view. The inflation surged to a 10-week high of 14.44 percent for the week ended on Dec 18 as prices of vegetables, particularly onions, fruits, cereals and protein-based products, continued to escalate.

Food inflation stood at 12.13 percent in the previous week. This is the fifth consecutive week when the rate of price rise of food items has increased.

However, food inflation is still far below the level of 21.19 percent seen during the same week last year.

On an annual basis, onions became costlier by 4.36 percent, whereas on a week-on-week basis, the increase was 3.49 percent, government data released here shows.

The rate of price rise of vegetables was 5.78 percent on an annual basis, while on a weekly basis, it was 4.58 percent.

Fruits became 19.01 percent more expensive, while milk grew 24.64 percent costlier on a year-on-year basis during the week under review.

A good monsoon and prospects of a bountiful kharif harvest had prompted the government to exude confidence about a decline in food inflation.

However, after moderating for a few weeks in Nov 2010, resurgent inflationary pressure has made all the government's calculations go haywire.

Unseasonal rainfall in Maharashtra, which resulted in damage to onion crops, saw prices of the staple vegetable soar by over Rs 80 per kg in mid-Dec 2010. This prompted the government to ban exports of the product and also remove import duty to increase availability in the domestic market.

High food inflation could prompt the Reserve Bank to increase key short-term rates at its policy review in Jan 2011.

The RBI deputy governor Subir Gokarn had last week hinted that more tightening monetary measures were likely to be taken by the apex bank at its next policy review, as headline inflation is not easing as fast as the apex bank would like and the upside risks still remain high.

"Inflation is not easing as we would like it to be... Upside risks to inflation are still high," he had said.

Overall inflation for Nov 2010 was at 7.48 percent, down from 8.58 percent in the previous month.

Experts have said that the rise in food inflation is likely to have repercussions on the final WPI inflation figures for Dec 2010.

PTI

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