Food inflation at 18-month low, govt warns against core prices

The decline in food inflation is seen as a breather for the government, as the rate of price rise has stubbornly remained high despite its fiscal measures and the RBI’s monetary tightening steps

New Delhi: Food inflation fell to an 18-month low of 7.7% during the week ended 30th April on the back of declining prices of pulses and vegetables, prompting the government to predict further moderation in prices due to record production of many food items, reports PTI.

The government, however, warned that the price rise of non-food items would continue to pose problems in the days ahead.

Food inflation, as measured by the Wholesale Price Index (WPI), was 8.53% in the previous week. It had stood above 21% in the last week of April 2010.

"The current trend in food inflation is welcome and we hope to see further moderation in food inflation in the coming weeks... However, there are concerns on price momentum in non-food articles," finance minister Pranab Mukherjee said.

India is estimated to have achieved record foodgrain production of 235.88 million tonnes in the 2010-11 crop year (July-June). This is on the back of all-time high output of wheat, pulses and maize. Apart from foodgrains, the country has produced a record quantity of oilseeds-30.25 million tonnes.

His reaction came in response to the decline in food inflation numbers to their lowest level since separate data for the segment was introduced in late 2009.

During the week under review, prices of pulses declined by 9.05% year-on-year, while vegetables became cheaper by 3.64%. Potatoes also came down by 3.58%.

"Sustained high non-food primary prices are creating cost-push inflationary conditions in the manufacturing sector.

Thus, even though food inflation is declining, concerns on higher core inflation remains," Mr Mukherjee said

He, however, exuded hope that recent monetary policy measures like the Reserve Bank of India's (RBI) hike in policy rates, would help in addressing the issue.

The RBI had hiked interest rate by 50 basis points earlier this month to tame demand and control inflation. It was the ninth hike in short-term lending and borrowing rates made by the central bank since March 2010.

Headline inflation was 8.98% in March, much above the government's comfort zone of around 5%. In its monetary policy for 2011-12, the RBI had projected inflation to average 9% during the first half of this fiscal before moderating to around 6% by the year-end.

Though rising food prices were the main contributor to inflationary pressure in 2010, recent months have witnessed a rise in prices of core (non-food) items. Core inflation was above 7% in March.

During the week under review, inflation in non-food primary articles was 28.62% during the week under review.

Fibre prices rose by almost 86% and minerals by 11.95%. Fuel and power were up 14.91%.

Core inflation is expected to grow further in the near future as the government is likely to soon announce a hike in retail prices of petroleum products.

"Fall in food inflation is on expected lines and the rate will remain moderate unless the coming monsoon fails. But global commodity prices, especially of oil, and their impact in the country have to be monitored," Crisil chief economist DK Joshi said.

Global oil prices continue to hover around $100 per barrel on account of the civil war in Libya, a major exporter and OPEC member, though it is down from the two-and-half high of over $120 per barrel touched in April.

While pulses and vegetables showed a moderation in prices during the week ended 30th April, other food items became more expensive year-on-year.

Cereals became dearer by 4.54% while fruit prices were up by over 35% on an annual basis. Onions grew 12.42% more costly on an annual basis.

Milk was also costlier by 4.3% in the week ended 30th April as compared to the corresponding seven-day period last year. Eggs, meat and fish were also up by 4.62%.

"The food inflation rate is gradually showing a trend toward normalisation. While this is encouraging, it is important to monitor the movement going forward. Usually rate spikes are seen in the post-monsoon period due to seasonality of agricultural output and supply side inefficiencies," Deloitte, Haskins & Sells director Anis Chakravarty said.


IIP growth slows to 7.8% in 2010-11; at 73% in March 2011

Factory output in March also witnessed lower growth of 7.3%, compared to 15.5% expansion in the same month a year ago. However, the performance in March was an improvement from the 3.6% growth registered in February this year

New Delhi: Poor performance of the manufacturing and mining sectors pulled down overall growth of industry to 7.8% in 2010-11 from 10.5% in the previous fiscal, reports PTI.

Factory output in March, as measured in terms of the Index of Industrial Production (IIP) released today, also witnessed lower growth of 7.3%, compared to 15.5% expansion in the same month a year ago.

However, the performance in March was an improvement from the 3.6% growth registered in February this year.

The manufacturing sector, which accounts for almost 80% of the index, saw its annual growth fall to 8.1% in 2010-11 from 11% in the previous fiscal.

The sector has also shown poor performance in the month of March, with meagre growth of 7.9% compared to the 16.4% expansion in the same month last year.

The mining sector also saw a decline in growth to 5.9% in 2010-11 from 9.9% in the previous fiscal. For March, the sector’s growth was a mere 0.2%, compared to 12.3% in the same month of 2009-10.

The capital goods segment was among the most affected as it grew by just 9.3% in 2010-11, compared to a robust 20.9% in the previous fiscal.

In March this year, the growth in capital goods production slowed to 12.9% from 36% in the same month of 2010.

During the last fiscal, growth of the electricity sector slowed to 5.6% as against 6% in 2009-10.

During March, the sector reported a growth of 7.2%, compared to 8.3% in the corresponding month of 2009-10.

Overall, 13 out of 17 industry groups achieved positive growth in March this year.

Production in the consumer non-durables segment went up by 2.2% during the 2010-11 fiscal, as against 0.4% in 2009-10.

The consumer durables segment grew by 20.9% in 2010-11, down from 24.6% expansion in 2009-10.

Overall, consumer goods output reported a rise of 7.5% last fiscal, as against 6.2% in 2009-10.

Intermediate goods reported a rise of 8.8% during 2010-11, down from 13.6% in the previous fiscal.


Rajaratnam found guilty on all insider trading charges

The hedge fund founder could face up to 20 years in prison for securities fraud and conspiracy, when the sentence is announced on 29th July

New York: Raj Rajaratnam, the hedge fund founder at the centre of the largest insider trading case in US history, was on Wednesday found guilty on all 14 counts of securities fraud and conspiracy.

Sri Lanka-born Mr Rajaratnam, founder of the Galleon Group, could face jail for up to 20 years. He has posted a $100 million bail bond which is valid till 29th July when the sentence will be announced. He will be fitted with an electronic monitoring device during this period.

The 54-year-old billionaire was convicted by a 12-member federal jury. He sat expressionless as the judge’s deputy read the jury’s verdict in a New York courtroom, PTI reports.

The jury had seven weeks of evidence and closing arguments in the trial, which began in March. The jurors–eight women and four men—reached their unanimous decision on the 12th day of deliberations, convicting Mr Rajaratnam of five counts of conspiracy and nine counts of securities fraud.

Under US federal sentencing rules that are not binding on the judge, Mr Rajaratnam faces between 15-1/2 years and 19-1/2 years in prison. Securities fraud and conspiracy carry a combined maximum penalty of 25 years imprisonment.

The prosecution accused Mr Rajaratnam of making $63.8 million through a web of highly-placed insiders to leak valuable corporate secrets between 2003 and 2009. But the defence argued that he traded on a “mosaic” of public information.

The government’s unprecedented use of extensive phone tapping in an insider trading case, which is more often deployed in organised crime and drug trafficking probes, may have marked a turning point in the prosecution of white collar crimes.

A total of 21 people have pleaded guilty in this insider trading case. Mr Rajaratnam, who was arrested in 2009, denied wrongdoing. He is expected to appeal the decision.

Over the course of the two-month trial, the conversations of Mr Rajaratnam and his friends and business associates were heard over courtroom loudspeakers from 46 digital audio recordings at the heart of the government’s case.

In these calls and from testimony, the jury learned how Mr Rajaratnam called from his mobile phone even when on holiday on a beach in Miami, or in Europe, to make arrangements to deposit money into accounts for friends who had provided him tips.

The friends and associates included Rajiv Goel, a former executive at Intel Corp, Rajat Gupta, who was once head of management consultancy McKinsey & Co and a former Goldman Sachs Group board member, and Anil Kumar, a former director of McKinsey & Co. They have pleaded guilty and testified against Mr Rajaratnam.

Mr Gupta, 62, faces civil charge by the US Securities and Exchange Commission for allegedly passing insider tips. Mr Gupta’s involvement as an unindicted co-conspirator prompted the government to make the unusual move of calling Lloyd Blankfein, CEO of Goldman Sachs, to testify at the trial. Mr Blankfein said that Mr Gupta had broken the firm’s confidentiality policy in his conversations with Mr Rajaratnam.



Gaurang Shah

6 years ago

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