Price fear

New Delhi, Dec. 30: The cabinet committee on prices, headed by Prime Minister Manmohan Singh, today “expressed concern” over the soaring prices of food items that have jacked up food inflation to 14.44 per cent for the week ended December 18 from 12.13 per cent in the previous week.

Costlier fruits, vegetables, milk, eggs, meat and poultry have pushed food inflation to a 10-week high.

The committee also took stock of the steps taken by the government to moderate the high price of onion, sources said.

“The high inflation rate is not due to base effect and is real. We are looking into it. So far as onion is concerned, we have taken care of it but the fluctuation in milk, fruit, vegetables and certain commodities have contributed to the inflation,” finance minister Pranab Mukherjee told reporters. Food inflation was 21.29 per cent a year ago.

“This is an area of concern. Earlier, we thought that it is because of the base effect but it is not merely the base effect. There has been real increase in the prices of certain food items,” Mukherjee said.

“We are waiting for full monthly figures. Weekly variations are there but whether these are corrected in the coming week that is to be seen. I am still holding that (financial) year-end inflation may be around 6.5 per cent,” Mukherjee added.

His estimate of the year-end inflation is higher than the 5.5 per cent indicated by Prime Minister Manmohan Singh and 6 per cent projected by the mid-year analysis of the finance ministry for the current fiscal.

Fuel inflation also rose year-on-year with petrol prices up 25 per cent, diesel 14.71 per cent and LPG 14.99 per cent.

The rise in food inflation from 12.13 per cent in the previous reporting week, experts said, will force the central bank to review its decision of keeping short-term key policy rates unchanged. The apex bank will undertake a quarterly review of the credit policy on January 25.

“If food inflation persists, the RBI may go for a moderate hike of 25 basis points in short-term rates. What is of more concern for overall inflation is the global fuel price,” said D.K. Joshi, chief economist with Crisil.