The Telegraph
Wednesday , April 16 , 2014
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Food inflation surge opens can of worries

New Delhi, April 15: Rising food prices snapped a declining trend in inflation and pushed the wholesale index to a three-month high of 5.7 per cent in March.

According to analysts, this could stop the Reserve Bank of India from easing interest rates to prop up the economy amid fresh signs of a slowdown.

Inflation in food items, based on the wholesale price index (WPI), shot up 9.9 per cent in March from 8.12 per cent in the previous month. Overall WPI inflation fell to a nine-month low of 4.68 per cent in February.

Consumer price inflation in March spiked to 8.31 per cent, driven by higher food prices, from 8.03 per cent in the previous month. Food prices in March rose 9.10 per cent from a year earlier, faster than February’s provisional 8.57 per cent rise.

According to data released by the government today, January WPI inflation has been revised to 5.17 per cent against an earlier estimate of 5.05 per cent.

In March, potato prices rose 27.83 per cent against 8.36 per cent in the previous month. Inflation in onion was 1.92 per cent compared with a contraction in February.

Overall inflation in the vegetable segment was 8.57 per cent against around 4 per cent in February. Fruits were costlier by 16.15 per cent in March compared with 9.92 per cent in the previous month.

The government said the build-up in inflation rate in 2013-14 was 5.7 per cent compared with 5.65 per cent in the earlier fiscal.

A sharper-than-expected moderation in vegetable prices in the past three months had raised hopes of a respite. However, recent unseasonal hail and heavy rains in some parts of the country damaged crops and drove up food prices again.

Mangoes are likely to be expensive this year as the overall domestic production is estimated to decline by up to 20 per cent than last year’s level of 18 million tonnes because of crop damage in some states, industry association Assocham said today.

RBI governor Raghuram Rajan has raised the repo rate to 8 per cent from 7.25 per cent since September to curb inflation. However, he left borrowing costs unchanged in the last review on April 1 and said further tightening was not anticipated if consumer-price increase stayed on path to hit 8 per cent in January 2015 and 6 per cent a year later.

CII director-general Chandrajit Banerjee said, “Demand in the economy is weak, as is evident from all indicators of growth.