Dearer vegetables push food inflation to17.4%

Written by Press Trust of India | New Delhi | Updated: Jan 29 2010, 07:59am hrs
After easing for three weeks in a row, food inflation inched up to 17.40% for the week ended January 16, a development that may prompt the Reserve Bank to hike key policy rates to tame the rising prices. Food inflation, which was falling after touching the decade's high of about 20% in December, has risen again, driven mainly by rising prices of eggs and vegetables.

It stood at 16.81% during the week ended January 9. Rising food inflation, analysts said, could force the central bank to increase cash reserve ratio (CRR), the portion of deposits that banks keep with the RBI, by 50 basis points in the third quarterly review of credit policy on Friday.

I expect RBI to increase CRR by 50 basis points in its review tomorrow, said Crisil principal economist DK Joshi. High food prices led to firming up of overall inflation too, which rose to 7.31% in December from 4.78% in November. The overall inflation was at sub-zero levels for 13 weeks till last September.

On a weekly basis, the price index for food articles rose by 0.4% on account of higher prices of eggs (6%), vegetables (2.1%), condiments and spices (2%) and bajra and jowar (1% each).

The inflation for primary articles, which include food and non-food items, stood at 14.66% in the reporting week. Potato prices soared 57.56% over the last year, followed by pulses which became dearer by 46.87%.