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Costly vegetables push inflation to 7 per cent

Published: 15th November 2013 06:00 AM  |   Last Updated: 15th November 2013 01:09 AM   |  A+A-

Led by onions, spiraling prices of other vegetables, costlier fuel and manufactured goods propelled inflation to an eight-month high of 7 per cent in October.

Rise in inflation, analysts feel could lead the Reserve Bank of India to go for a fresh hike in interest rates in its forthcoming policy on December 18.

The inflation measured on the wholesale price index (WPI) was at 6.46 per cent in the previous month and 7.32 per cent in the October 2012.

As per the government data released today, rate of price rise in food articles was at 18.19 per cent in October.

While inflation in the vegetable segment stood at 78.38 per cent in October, the rate of price rise in onion continued to remain astronomically high at 278.21 per cent. Protein rich items like egg, meat and fish became dearer by 17.47 per cent against 13.37 per cent in September.

The jump in WPI inflation comes after the October retail inflation increased to 10.1 per cent, the highest in the past seven months.

Reacting on the inflation numbers director general CII Chandrajit Banerjee said, “The high food prices calls for urgent steps to increase the efficiency of the food supplies chain through appropriate policy responses to cut down on intermediaries and reduce waste.”

Even RBI Governor Raghuram Rajan Wednesday in his interaction with the media termed food inflation as “worryingly high.” 

“Despite high inflation especially in food articles and vegetable prices, the government is doing precious little to stem the spike,” an analyst with a global consulting firm said.

The WPI data released by the Department of Industrial Policy and Promotion  further revealed that inflation in the primary articles segment also inched up to 14.68 per cent in October from 13.54 per cent in the previous month.

Inflation in fuel and power segment, at the wholesale level, too was marginally up at 10.33 per cent.

RBI that has all along maintained that inflation should be in the ‘comfort zone’ of 4 to 5 per cent for it to consider any cut in interest rates.

The RBI  increased the key rate twice in its last two monetary policy reviews with an aim to check high inflation.

As per the data, while there was slight moderation in prices of cereals and rice, wheat became dearer in October. The data also revealed that inflation in manufactured products was inching up to 2.5 per cent versus 2.03 per cent in September.

While terming a hike in inflation as “disturbing” industry chamber Assocham said while jump in inflation is surely a disturbing sign, the rise in ‘build-up inflation’ to 6 per cent in the fiscal so far clearly indicates that there is still pain ahead.

Commenting on the data, Leif Eskesen, chief economist for India & ASEAN at HSBC, said this underscores the need for stepped up structural reform implementation and a hawkish central bank to scare away the inflation ghost.



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