Food inflation spikes further...Fuel prices too rise

Annual rate of inflation in the sensitive Food Articles space increased anew in the third week of December, putting further pressure on policymakers to check the spiraling prices of essential food commodities. Inflation in the Food Articles group climbed to 14.44% in the week ended December 18 from 12.13% in the previous week, the Union Commerce & Industry said. This was the fourth instance of an increase in food inflation after easing for seven consecutive weeks. Inflation in the food articles space was at 21.29% in the year-ago period.



Inflation in the Primary Articles group jumped to 17.24% in the week under review from 15.35% in the week ended December 11, the Government data showed today. Inflation in the Primary Articles space was at 18.45% in the comparable period last year. Inflation in the Fuel & Power group inched higher to 11.63% in the week ended December 18 from 10.74% in the week ended December 11. Inflation in the Fuel & Power space was at 5.06% in the week ended Dec. 19, 2009. Inflation in the Non-Food Articles group and Minerals group stood at 23.13% and 26.74%, respectively year over year.

On an annual basis, onions became costlier by 39.66%, whereas on a week-on-week basis, the increase was 3.49%. The year-on-year increase in vegetable prices was 29.26% while on a weekly basis it was 4.58%. Fruits became costlier by 21.97% year over year, while milk prices grew by 17.75% on an annual basis during the week under review. Egg, Meat & Fish became pricey by more than 20% compared to the year-ago period. Potatoes turned cheaper by about 24% annually while inflation in Cereals was almost negligible year over year and that in Pulses fell by nearly 11%. There was virtually no inflation in rice too year-on-year while wheat prices fell by 5.51%.

India's benchmark WPI inflation rate slowed in November from the year-ago period due to moderation in prices across key categories, data released by the Government showed on Dec. 14. The point-to-point inflation, as measured by the WPI, came in at 7.48% in November as against 8.58% in the previous month. The figure was in line with consensus estimates of 7.5%. But, the Government revised upwards September's final WPI inflation rate to 8.93% from the preliminary projection of 8.63%.

The Reserve Bank of India (RBI) has set a target of 5.5% headline inflation by the end of the current fiscal year in March 2011, although it sees the risk to the upside. The central bank might have to increase key policy rates at its next meeting in late January after leaving them unchanged on Dec. 16. It has so far hiked interest rates six times since March.