Pranab calls for global action on price rise
Food inflation was 8.76 per cent in the previous week.
However, the rate of price rise of food items is much lower now than the 20.91 per cent reported in the corresponding week of last year.
Experts, however, said global commodity prices, mainly of crude oil, will have further impact on the country`s overall inflation and that the Reserve Bank was likely to hike its interest rates further.
Speaking at the Asian Development Bank`s annual meeting in Hanoi, Mukherjee said the recent volatility in international prices of food and fuel has thrown up fresh challenges in management of inflation and could well turn out to be a long-term global problem.
"…management of inflation, in addition to domestic efforts, will increasingly have to be a globally coordinated effort," he said.
"Inflation, particularly, the increase in food prices is a major concern for India as well as other developing countries. We are trying to reduce it to supply and demand side management.
"We are looking at easing of the price situation in India with adequate buffer stock and hopefully a good monsoon", Mukherjee told reporters in the Vietnamese capital.
An Inter-Ministerial Group headed by Chief Economic Advisor Kaushik Basu will hold a meeting here tomorrow to review the price situation in the country.
During the week under review, wholesale prices of pulses declined by 7.39 per cent on a year-on-year basis. However, all other commodities witnessed a rise.
Basu said while inflation remains at "unacceptably high" level it is expected to moderate. "I am expecting it will dip down a bit," he said.
He said the inflation for April would be "definitely below nine per cent", a line which is in variance with RBI`s average projection.
In its monetary policy, which was mainly focused on inflation control, the RBI projected overall inflation to fall to around 6 per cent by March 2012.
However, the central bank had said that high global commodity prices would keep inflation at a higher level of around 9 per cent in the first half of the fiscal.
Headline inflation has been above 8 per cent since January 2010. It stood at 8.98 per cent in March this year.
Economists said rising global commodity prices, specially oil which has crossed USD 110 per barrel on account of political turmoil in Middle East and North Africa, will put increasing pressure on core inflation, which does not factor in food prices.
The domestic prices are also likely to be increased next week.
"Oil prices are an area of concern with most of our needs being met by imports and the global prices are quite high. If inflation continues, RBI will have to increase rates by another 50 basis points," Crisil chief economist D K Joshi said.
Concurring with the view, Yes Bank`s chief economist Shubhada Rao said: "During the course of the year RBI is likely to hike its rates by another 50-75 basis points."
The RBI has hiked its interest rate nine times since March 2010. The latest round of hike of 50 basis points in the short-term lending and borrowing rates came on May 3 during the release of the annual monetary policy.
During the week under review, cereals became dearer by 4.42 per cent year-on-year, with rice and wheat becoming more expensive by 2.08 per cent and 0.06 per cent respectively.
Vegetables prices were overall up by 3.44 per cent.
Potatoes became dearer by 0.27 per cent on an annual basis and onions rose by 16.09 per cent.
Fruits and protein-based items continued to become more costly.
Fruits became dearer by 32.69 per cent year-on-year, while milk was up by 5.16 per cent and eggs, meat and fish by 5.13 per cent.
The rate of price rise of non-food primary articles stood at 27.84 per cent.
Fibres became expensive by 85.58 per cent year-on-year, while fuel and power was up by 13.53 per cent and petrol by 21.81 per cent respectively.
"The marginal decrease in the weekly food inflation rate is of low relevance. Of larger significance is the persistent level of headline inflation," Deloitte, Haskin & Sells director Anis Chakravarty said.
Crisil`s Joshi said structural factors like rising income resulting in more consumption and lack of proper supply chain are responsible for rise in prices of fruits, milk and protein-based items.