New Delhi: Soaring onion prices pushed food inflation to a 10-week high of 14.44% for the week ended 18th December, a worrying development that could prompt the Reserve Bank of India (RBI) to hike key policy rates next month to check price rise.
“This is an area of concern no doubt... there has been real increase in the prices of certain food items. We are looking into it,” finance minister Pranab Mukherjee said.
Food inflation rose for the fifth consecutive week on the back of high onion prices that rose by almost 40% on an annual basis to touch Rs75-80 per kg in the retail market, reports PTI. However, the prices have declined a little since then.
The price rise was also quite steep for vegetables, fruits and protein-based products like milk, egg, fish and meat. The price rise in these products ranged between 17 and 30%.
“So far as onion is concerned, we have taken care of it... but the fluctuation in milk, fruits, vegetables and certain commodities have also contributed to the inflation. We are waiting for the full monthly figure,” Mr Mukherjee said. “Weekly variations are there. Whether these are corrected in the coming week is to be seen. But I am still holding that year-end inflation may be around 6.5%.”
Mr Mukherjee’s estimate of year-end inflation, however, is higher than the 5.5% that prime minister Manmohan Singh indicated earlier this month.
Experts say that the rise in food inflation by 2.31 percentage points from 12.13% in the previous reporting week would force the central bank to review the pause on a short-term rate hike at the quarterly policy review meet on 25th January 2011. Food inflation was at 21.29% a year ago.
The recent hike in the petrol price by about Rs3 a litre also contributed to pushing up the index of fuel and power by 11.63% year-on-year during the week. The rise in index on account of the petrol price increase was over 25%.
“If food inflation persists, the RBI may go in for a moderate hike of 25 basis points in short-term rates at its next policy review,” said Crisil chief economist DK Joshi. On the impact of the fuel price hike, he said: “What is of more concern to overall inflation is the global fuel price. We believe that fuel price will remain a challenge for the government in 2011.”
Rising inflation, saw the government put off a decision to raise the price of diesel yesterday, even as global crude prices soared to $92 a barrel, the highest in two years.
“There could be some monetary action before the end of the fiscal if inflation remains at such a high level for sometime,” said Anubhuti Sahay, economist at Standard Chartered Bank.
For the week under review, the price of cereals declined marginally by 0.70% y-o-y, while that for pulses fell by 10.79%. The price of rice went up marginally y-o-y, while that for wheat declined by 5.51%. Potato prices also declined on an annual basis by almost 24%. On a weekly basis, however, the price of most items—barring vegetables—moved in a narrow range.
The last time food inflation was this high was in the week ended 9th October when it was 15.53%. Food inflation has been in the double-digits through most of 2010. But the government was looking forward to a moderation in food inflation after a normal monsoon.
But after a brief decline in November, food inflation again started to climb on account of the rise in onion prices. Onion prices have shot up due to destruction of crop in some parts by unseasonal rain and hoarding. Last week, the government announced a ban on exports of onions and also withdrew import duty to increase availability in the domestic market.
Lanco Infratech Ltd said it would undertake a Rs1,000 crore contract for constructing a portion of the Aligarh to Kanpur section of the National Highway in Uttar Pradesh.
“Lanco Infratech Ltd has emerged as successful bidder for two-laning of Aligarh to Kanpur Section of NH-91 in UP,” the company said in a statement.
The scope of work involves two-laning of existing road, repair, widening and reconstruction of three major and 29 minor bridges, construction of five new Rail-over-Bridges, 4 toll plazas and other wayside amenities.
The project involves an investment of around Rs1,000 crore. The grant from National Highways Authority of India (NHAI) would be Rs287.91 crore.
On Thursday, Lanco Infra ended 0.32% up at Rs62.65 on the Bombay Stock Exchange, while the benchmark Sensex gained 0.66% to 20,389.07 points.
Infrastructure services provider Pratibha Industries Ltd said it has won two projects worth Rs73.28 crore for construction of residential complexes.
The order from Mahindra Lifespace Developers Ltd is for construction of a residential building ‘Mahindra Angelica’ in Goregaon, Mumbai. The completion period of the project is 24 months.
The second order is from Luxora Mist (Soham Group) for construction of two residential buildings in Thane, Mumbai, with a completion period of 20 months.
On Thursday, Pratibha Industries ended 1.94% up at Rs68.45 on the Bombay Stock Exchange, while the benchmark Sensex gained 0.66% to 20,389.07 points.