Food-inflation in double digits

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Reserve Bank of India
New Delhi, Mar 25: Analysts were surprised and this demands government concern i.e, food inflation has touched double digits again from 9.42% to 10.05% for the week ended on March 12. This is a serious concern as prices of fruits, vegetables and edibles surged up.

During the week, vegetable prices went up by 11.20% on a year-on-year basis, meanwhile fruits were dearer by 23.60%. The protein rich eggs, meat and fish continued to be above the 13.21% mark.

Some analysts fear after this inflationary pressure it will not be surprising to see the Reserve Bank of Indian (RBI) going in for a rate hike again. Others feel the rise in food prices has been due to a mismatch in demand-supply and these constrains cannot be tackled by RBI.

There is also a possibility that RBI may be forced to hike the rate. The argument goes on the lines, since food articles have over 14% weightage in the WPI basket, which will affect the headline inflation directly, invariably putting pressure on central bank to change the key policy rates during the monetary policy review in May.

The apex bank has hiked its short-term lending and borrowing rates eight times since March last year to tame the inflationary pressure.

Oil concerns

Further inflationary pressure can come from the uncertainty looming in Middle East and North Africa region, as it will affect the oil prices directly. Political turmoil in Libya has already pushed oil prices up. With Bahrain, Syria and Yemen on the cusp of boiling up, many expect that oil prices will push further north. Additionally analysts across the board foresee  an increase in demand for oil and gas for electricity generation due to the nuclear disaster in Japan.

The only thing stopping the rise in price of diesel and petrol are the elections in four states. Once the elections are over, it will not be surprising if the people of India are made witness to a new round of inflationary spiral.

OneIndia News

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