Higher food prices push inflation to seven-month high of 6.46 per cent

The sharpest increase was witnessed in case of onion prices which jumped by 323 per cent year on year in September.

In what could make the almost difficult the task of Reserve Bank of India (RBI) to cut interest rates, headline inflation unexpectedly touched a seven-month of 6.46 in September riding on the back of a whopping 323 per cent increase in price of onion followed by all round hike in price of other fruit and vegetable items.

Inflation, based on wholesale price index (WPI), was at 6.1 per cent in August and 5.85 per cent in July. The latest data released by the government on Monday put the food inflation at 18.40 per cent in September over the same month last year. The food prices had shot up 18.18 per cent in August.

The sharpest hike was seen in case of onion prices which jumped by 323 per cent year-on-year in September. The price of vegetables in general rose by 89.37 per cent making life difficult for the common man. Fruits, too, were costlier by 13.54 per cent year-on-year during the month.

Inflation in liquefied petroleum gas (LPG) and petrol was at 9 per cent and 9.64 per cent on annual basis. However, there was decline in prices of egg, meat, fish and manufactured food items like beverages and tobacco products. Overall, inflation in manufactured items showed a moderate increase of 2.03 per cent during the month on annual basis.

The RBI is scheduled to unveil its second quarter review of monetary policy on October 29 and will have to take into account the rising inflation while announcing its next steps to boost growth and economic activity.

Last month, worried over the trend of rising inflation, new RBI governor, Raghuram Rajan surprised markets by announcing a interest rate hike in his policy review.

Similarly, the annual consumer price inflation quickened more than expected to 9.84 per cent in September from 9.52 per cent in August, government data showed. Food prices for consumers last month rose 11.44 per cent from a year earlier, faster than August`s 11.06 per cent rise.

Reacting the inflation figures, Planning Commission Deputy Chairman, Montek Singh Ahluwalia said it would soften in a month or so and the prices of items like onion had already started showing a downward trend. "I agree the inflation is still on the high side but it will soften in a month or so,’’ he told reporters here.

Dr. Ahluwalia said the comfort level of inflation is 5 to 6 per cent and it is higher than six per cent, it is uncomfortable. We have to keep it below six per cent mark,’’ he said. The inflation is mainly driven by higher prices of cereals andonions. The onion prices will cool off in October and the data will be much better, he added. "Government has put in place a mechanism using some of the food stock to keep a check on prices and ease the pressure. I believe that we will the effect of that mechanism in the weeks ahead,’’ he remarked.

by The Hindu

New Delhi, October 14, 2013

Updated: October 15, 2013 01:33 IST