"Unacceptably high" food prices pushes inflation to 8.43 pc

New Delhi, Jan 14 (PTI) Expensive food items pushedoverall inflation to 8.43 per cent in December, but expertssay the rate of price rise will come down now since thecountry has seen the peak of food prices.

The 0.95 percentage points rise in inflation from 7.48per cent from the previous month is likely to prompt RBI tohike key short-term rates later this month.

However, many doubt the effectiveness of monetary policyto tame high food prices, which Finance Minister PranabMukherjee termed as "unacceptably high."

After the Government asked states to remove bottlenecksin supply of food items yesterday, Mukherjee said he wouldagain raise the issue of high inflation with his statecounterparts during the pre-budget interactions, slated forJanuary 19.

The contribution of food inflation to overall inflationcould be gauged from the fact that ''manufactured'' inflation,in fact, came down to 4.46 per cent in December from 4.56 percent in the previous month.

It could also be assessed from the fact that theseare mainly vegetable prices which have already risen duringthe month.

Vegetable prices rose by 22.90 per cent in Decemberversus the previous month. Within vegetables, onions turnedexpensive by 34.86 per cent and potato by 16.29 per cent.

Other items moved in a narrow range, with the highestprice rise seen in fibres (4.09 per cent) and minerals (3.4per cent).

Food inflation remained high throughout in December andtouched 18.32 per cent before coming down to 16.91 per centfor the week ended January one.

"Food inflation at this level is not acceptable and weare trying our best to control it along with the cooperationof state governments," Mukherjee said.

Yes Bank chief economist Shubhada Rao said the overallinflation is likely to ease going forward as the worst ofprimary articles (those found in raw form) has already beenwitnessed.

Even then she expected overall inflation to exceed sevenper cent by March-end, much higher than 6.5 per cent pegged bythe Finance Ministry and 5.5 per cent, projected by RBI.

"The headline inflation at 8.43 per cent still remainselevated beyond comfort and we expect the RBI to raise policyrates by 25 basis points," she said.

Rao said fuel inflation would rise going forward.

Fuel and power inflation rose to 11.19 per cent inDecember from 10.32 per cent in the previous month.

Even the Finance Minister raised doubts over controllingpetroleum prices if the international crude prices rosefurther. (More) PTI JD IND