The price spike in onion and other vegetables pushed up food inflation to a 10-week high of 14.44% for the week ended December 18, prompting the Union finance minister to declare that more steps would be initiated to control inflation. Food inflation for the previous week was 12.13%.
Late evening, the Cabinet Committee on Prices (CCP) chaired by Prime Minister Manmohan Singh reviewed prices of essential commodities. According to agency reports, the meeting expressed concern over the recent increase in prices of onion and took stock of the steps taken by the government. It also noted the rise in output of kharif pulses and decline in prices.
Earlier, RBI deputy governor Subir Gokarn said food inflation had emerged as the new risk factor because of the demand-supply mismatch and rising global commodity prices.
Gokaran?s statement was viewed by experts as a sign that the central bank might hike its key policy rates again next month to check soaring prices.
?This is an area of concern no doubt… There has been real increase in the prices of certain food items. We are looking into it,? finance minister Pranab Mukherjee told reporters after the data was released.
Inflation rose for the fifth consecutive week on the back of onion prices which had jumped almost 40% on an annual basis, touching Rs 75-80 per kg in the retail market.
Onion prices have declined since then, but other vegetables stay at elevated prices. The price rise was also quite steep in case of vegetables, fruits and protein-based products like milk, egg, fish and meat.
The price rise in these products ranged 17-30% . ?So far as onion is concerned, we have taken care of it… but the fluctuation in milk, fruit, vegetable and certain commodities have contributed to the inflation. We are waiting for the full monthly figure,? finance minister Pranab Mukherjee said.
Moreover, the impact of the recent hike in petrol price by about Rs 3 per litre also pushed up the index of fuel and power by 11.63% year-on-year during the week. The rise in index on account of increase in price of petrol was over 25% .
?If food inflation persists, RBI may go for a moderate hike of 25 basis points in short-term rates at its next policy review in January,? PTI reported, quoting Crisil chief economist DK Joshi.
Rising inflation promted the government to defer any decision on raising prices of diesel, despite global crude oil prices soaring to $92 per barrel, the highest in the last two years.
For the week under review, the price of cereal declined marginally by 0.70% year-on-year, while pulses fell by 10.79%.
The price of rice went up marginally year-on-year, while wheat declined by 5.51% . Potato prices also declined on an annual basis by almost 24%.
On a weekly basis, however, the price of most items ? barring vegetables?moved in a narrow range. The last time food inflation was this high was in the week ended October 9 when it was 15.53%.