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NEW DELHI -- Continuing its upward spiral, food inflation neared 17% at 16.9% in the week ended June 12 from 16.12% a week ago.

The data comes a day ahead of a ministerial panel's meeting to decide on increasing fuel prices. The latest data on food prices reinforces the deepening impact on headline inflation, which has already topped 10%, and will weigh on the minds of the panel.

The main contributors of food inflation's rise are pulses and milk. Year-on-year, pulses turned dearer by 34.14%, while milk cost 21.12% more. However, prices of potato and onion were down by 37% and 22%, respectively. Food inflation has pushed core inflation into double digits in May, prompting speculation that the Reserve Bank would tighten monetary policy to temper consumer spending.

"Inflation rate has reached uncomfortable levels. Therefore, some action is called for. It is for the Reserve Bank to decide on the timing. But, some action is called for,'' PM's Economic Advisory Council chairman C Rangarajan had said earlier this week, setting off speculation that action could come before the Bank's July 27 scheduled policy review.

FM Pranab Mukherjee too had dropped broad hints that there could be policy action by RBI, saying: "So far as the monetary part is concerned, the Reserve Bank will look into it.'' However, economists indicated no such immediate action was warranted as the index was almost unchanged.

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Publication:Pakistan & Gulf Economist
Geographic Code:9INDI
Date:Jul 4, 2010

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