Successive RBI rate hikes notwithstanding, inflation showed no signs of retracting and remained at an over nine per cent
level for the 11th month in a row in October. The rate of price rise last month rose marginally to 9.73 per cent from 9.72 per cent in September, credited to the mounting inflation in food articles, specially tomatoes (among vegetables) and pulses coupled with high demand in the festival season.
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The government expressed the hope that agricultural commodity rates would calm down as a result of good monsoon. We have already taken steps to address the supply-side shortage, Finance Minister Pranab Mukherjee said. However, analysts noted that if overall inflation does not come down drastically next month, it would be a year of high inflation at over nine per cent mark. That would be a dismal performance on the price front far a developing economy that is India, they add. In October, food articles saw inflation surging to 11.06 per cent from 9.23 per cent the previous month. This was on the back of high inflation seen in vegetables and pulses. Inflation in vegetables rose to 21.76 per cent in October from 14.04 per cent in September, despite price pressures easing from onions and potatoes. Onions and potatoes saw inflation easing to a great extent to -16.16 per cent and 1.30 per cent from the heights of 23.58 per cent and 14.64 per cent respectively in September. Tomatoes, though having a small weight of 0.26 per cent in wholesale price index (WPI), recorded 43.3 per cent inflation in October, up from -24 per cent in September. Late rainfalls have harmed standing tomato crops, particularly in Himachal Pradesh. Pulses saw the rate of price rise jumping to 9.63 per cent from 2.06 per cent.
There was a 10 per cent shortfall reported in the production of pulses in the kharif season, as 6.43 million tonnes was produced this year as against 7.12 million tonnes last year. Points out the YES bank report on WPI numbers for October: While undoubtedly October inflation is uncomforting on several fronts, a sharp depreciation in rupee and a rise in festive related food inflation are the key drivers of inflation in the month. The fuel inflation remained steady at 14.79 per cent. Oil marketing companies went to for another petrol price hike of Rs 1.82 per litre in November, the effect of which will be seen in the inflation numbers for this month. High WPI inflation numbers showed no respite, despite RBIs repeated attempts to tame it through 13 rate hikes since March 2010. Far from improvement, it is taking a hit at the growth figures. Recent IIP numbers was a sad story, as industrial production grew by a lowest in two years of 1.9 per cent in September. However, the central banks tight monetary stance did help a check of spread of high inflation in food articles to manufactured products. Inflation in manufactured products remained nearly stable at 7.66 per cent in October versus 7.69 per cent in September. But, given the high overall inflation numbers and the sliding growth figures, the RBI will have to look at alternative policy options to deal with the inflation issue in its next policy meet on December 16. At its second quarterly review last month, RBI said it expected inflation to start moderating by December and fall to 7 per cent by March next year.
: Prime Minister Manmohan Singh Friday said inflation in food articles in India was, indeed, a problem but said that grain prices have been relatively stable. He also ruled out a roll back in the decision to decontrol petrol prices. "What prices are going up are prices of vegetables, prices of eggs, prices of fish, that is the secondary and tertiary food items. That is a reflection of the demand for these commodities exceeding supplies," the prime minister said.
Historically, the rise in price of food articles had been tied to the rise in prices of fuel. Recently, it was also linked to the inclement crop outlook in the world, notably since the beginning of 2008. However, the present inflationary trends belie such assumptions. This time around, inflationary trends cannot be fully attributed to petrol and high speed diesel oil prices. Moreover, the record food grains production & procurement last year has been widely touted as being sufficient to manage domestic food demand. Yet still, the country has been witnessing unprecedented rise in prices of food articles, and the policy makers are being forced to rethink inflation management strategies; various reasons have been attributed to this trend, these include:
Firstly, food inflation is a direct result of the triad of late monsoons, drought and flood in some regions of the country this year. Consequently, Kharif output has been officially stated to be lower thanlast year, with significant deficiencies in production of food grains, pulses, and oil seeds. Secondly, besides rice and wheat, for which the country has sufficient stocks, carryover stocks for pulses, oilseeds and sugar are not adequate to help country tide over this predicament; essentially indicating a supply driven [Link], governments handling of public distribution system in the current fiscal especially in the light of drought situation; fourthly, structural drivers in form of implementation of NREGA, which, though worthwhile, is essentially a consumption expenditure, consequently resulting in too much money floating in the system; andfifthly, large number of intermediaries in agriculture supply chain & their unrealistic margins thereof. Over the top inflation currently being registered is said to be happening primarily because of the interplay of the above factors.
7 Reasons Why Food Prices are Increasing in India
18 Jul, 2010 Uncategorized
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ShareThis Food Prices have become one of the most important topics in India over the last 2 years.A Deficient Monsoon season in 2009 was the primary cause of a sharp rise in Food Prices leading to Food Insecurity for a majority of the India.A recent study found that more than half of the Indians still live in poverty making Food Prices perhaps the most important issue for [Link] a vast majority of Indians living on wages below $2/day,increasing food prices can mean hungry stomachs to even sometime [Link] that starvation is new to the Indian state with parts of Eastern India particularly Orissa infamous for starvation [Link] inflation in India has continued to rage even in 2010 with prices increasing by a whopping 1718%.What has led to this sharp rise in food prices which has made the lives of poor Indians even more [Link] causes are both local and external and have been listed down
1. 2. 3. 4. 5. 6. Higher Food Prices worldwide as Food Futures are treated as an Asset Class by Investment Banks and their Clients MNREGA scheme which has led to labor shortages amongst rural workers and higher wages Lower agricultural growth in India compared to the much faster GDP growth Rising percentage of Middle Class in India which is demanding increasing quantities of better quality food [Link] increasing incomes,people prefer to eat more meat which is more foodgrain intensive than a vegetarian diet High general Inflation is also a contributor to higher Food Prices Inefficiency in the Food Supply [Link] wastes a huge amount of Food due to an antiquated supply structure which involves middlemen and [Link] middlemen add no value and lead to higher retail prices for food besides indulging in hoarding [Link] investment in the Retail area has been prevented by these vested interests. Dependence of Indian Agriculture on Monsoon [Link] low investment in Irrigation has implied that a majority of the crop growing areas are dependent on seasonal [Link] was brought out starkly when Monsoon Rains failed in 2010
7.
Indias Food-Price Inflation Holds Near 11-Year High Bloomberg
Indias benchmark measure of food inflation held near an 11-year high, highlighting the challenge policy makers face in curbing inflation without hurting a nascent economic [Link] index of food articles compiled by the commerce ministry increased 18.22 percent in the week ended Dec. 26 from a year earlier, following a 19.83 percent gain in the previous week. Food-price inflation accelerated to 19.95 percent in the week to Dec. 5, the fastest pace since Dec. [Link] gains eased in the week to Dec. 26 from the previous week as costs of some food items softened. Prices of vegetables gained 30.97 percent in the week, compared with 46.7 percent rise in the prior period, while fruits rose 7.87 percent, less than 10.35 percent, todays report showed. Milk prices increased 12.6 percent from 13.6 percent. Summary Rising Food Prices is a Burning Topic for India despite a lack of attention given to it by mainstream media [Link] has been a massive amount of food insecurity amongst ordinary Indians who are finding it difficult to meet their basic nutritional [Link] current government has not done enough to alleviate this problem despite increasing revenues derived from a rapidly growing [Link] proposed Food Security Bill will be an important Law to solve this food crisis if is not diluted by vested interests.