Higher food prices led to more inflation in Oct

New Delhi, Dec 13: A sharp rise in the food articles from 17 per cent in October 2005 to 32 per cent in October 2006, coupled with a significant rise in manufactured product prices like metals, cement and textiles from 35 per cent to 45 per cent pushed the inflation rate in the month to higher levels.

On the back of low stocks and high international prices, the prices of wheat increased to 18 per cent in October 2006 from 1.4 per cent in October 2005. Export of rice and wheat, shortfall in production and procurement of wheat, and upward revision in Statutory Minimum Prices were some of the other reasons for the rise in prices.

Prices of pulses also edged higher from last year's level, reflecting stagnant domestic production and higher demand. Increase in prices of pulses was estimated at over 5.5 per cent to 43 per cent between October 2005 to October 2006, according to a study.

''The gap between demand and supply of pulses in the country, caused by dormant production of pulses, together with increasing consumption was estimated at around five million tonnes in 2004-05.

The main reasons for hike in pulses imports are shortage of pulses in domestic market and comparatively higher prices in international market,'' said industry body Assocham President Anil K Agarwal.

During October 2005 and October 2006, Milk prices increased by 7.3 per cent to 9.3 per cent respectively. India continues to be the largest producer of milk in the world with its production level at 90.7 million tonnes in 2004-05. Increase in input, utility and services costs are the reasons that led to the rise in its prices.

Another reason for rise in prices is rapid increase in consumption of milk and its by-products among households. The eating habits have undergone major changes with growing demand for pizzas, where large quantities of cheese and butter are used.

India is the second largest producer of fruit and vegetables in the world. Fruits recorded a steep rise of 9.3 per cent in October 2006 as compared to 7.3 percent in 2005.

However, manufactured products contribution to inflation has remained relatively moderate so far even as it has increased to 4.2 per cent on October 2006 from 3 per cent on October 2005.

Competitive pressures, productivity gains and strong corporate profitability have provided firms the flexibility to absorb higher input prices into their profit margins.

Furthermore, pre-emptive monetary actions by anchoring inflation expectations have restrained the second order effects of past increases in oil prices to manufactured products prices.

Manufactured products inflation was led by metals, textiles and cement.

The year-on-year inflation in the manufactured products group, excluding the fuel group, at 5.1 per cent as on October 2006 was marginally lower than the headline rate.

In evaluating movements in fuel group inflation, it may be noted that the pass-through of higher international oil prices has been restricted to petrol and diesel, the study added.

UNI