Inflation - she is a Dain

There is no respite from the spiraling food prices just yet and looks like the policymakers won't have any easy time dealing with the menace in the near term. Annual rate of inflation in the sensitive Food Articles space increased further in the penultimate week of December, putting further pressure on policymakers to check the spiraling prices of essential food commodities.



Inflation in the Food Articles group jumped to 18.32% in the week ended December 25 versus 14.44% in the preceding week, the Union Commerce & Industry said. Inflation in the food articles space was at 19.90% in the year-ago period. This was the fifth instance of an increase in food inflation after easing for seven consecutive weeks.

Inflation in the Primary Articles group also rose to 20.20% in the week under review from 17.24% in the week ending December 18, the Government data showed today. Inflation in the Primary Articles space was at 17.36% in the comparable period last year. However, inflation in the Fuel & Power group remained unchanged at the previous week's level of 11.63%. Inflation in the Fuel & Power space was at 5.06% in the week ended December 26, 2009.

Inflation in the Non-Food Articles group stood at 22.39% in the week under consideration versus 23.13% in the previous week. Inflation in this group stood at 10.70% in the year-ago period. Minerals group inflation was at 30.58% in the week ended December 25 compared to 26.74% in the week ended December 18. It was at 12.04% in the comparable period a year earlier.

On an annual basis, onions became costlier by 82.47% in the week under review, whereas on a week-on-week basis, the increase was 23.10%. The year-on-year increase in vegetable prices was 58.85% while on a weekly basis it was 16.22%. Fruits turned costlier by nearly 20% year over year, while milk prices increased by 16.6% on an annual basis during the week under review.

Egg, Meat & Fish became pricey by more than 20.83% compared to the year-ago period. Potatoes turned cheaper by about 15% annually while inflation in Cereals was almost negligible year over year and that in Pulses fell by nearly 10.5%. Inflation in Rice year-on-year stood at 1% while wheat prices fell by 5.4%.

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.