Food inflation surged to 18.32 per cent for the week ended December 25 on the back of a sharp increase in the prices of onions, green vegetables, milk, fruits, eggs and meat stretching strained household budgets even further.
According to official data released on Thursday, the rate of inflation jumped by 3.88 percentage points from 14.44 per cent in the previous week. The government has been caught by surprise as it had forecast a decline in the prices of food items following a normal monsoon this year.
Onion prices shot up by a huge 82 per cent while the overall prices of vegetables surged by 58.85 per cent. Onion prices had started edging downward from the peak of Rs 85 per kg but with Pakistan banning exports through the Attari-Wagha border prices may harden again.
The prices of milk and fruits rose by close to 20 per cent while those of eggs, meat and fish shot up by 20.83 per cent, making things more difficult for middle class families who have to pay more for commuting after the Rs3 a litre hike in petrol prices.
Finance minister Pranab Mukherjee said, "These are weekly variations, but it is a matter of concern. Let us wait for the monthly figures." Chief economic advisor Kaushik Basu said the rise was expected, but not to the extent of 18.32 per cent. The UPA which is at the receiving end from the Opposition following the various scams that have surfaced lately. Meanwhile, Mukherjee said that the state governments need to ensure that all bottlenecks in the supply chain are removed so that food prices can be brought down quickly.
According to a finance ministry statement, while there are some weather-induced supply constraints on some of these items which go against the seasonal decline normally seen at this time of the year, a large part of the price rise is due to the widening gap between the wholesale and retail prices and the growing demand for these products due to rising incomes.
However, these figures are based on wholesale prices. So, the finance ministry's argument that the inflation is due to rising gap between wholesale and retail prices does not hold good. Home minister P. Chidambaram, who was finance minister in the first UPA government, is skeptical on whether the government can rein in inflation.
"I am not sure whether we understand all the factors that contribute to price rise. Nor am I sure whether we have, at our hand, all the tools to control inflation," he had said on Wednesday.
Senior economists said that soaring food prices would exert pressure on the Reserve Bank of India (RBI) to raise interest rates again when it reviews its policy on January 25. Rising rates dampen demand and choke economic growth.
India Inc is worried over this issue. Amit Mitra, secretary general, Ficci, said, "Food prices have once again gone up and this shows that monetary policy has become ineffective in containing food inflation."
Courtesy: Mail Today
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