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The embattled UPA Government seems to be losing ground in its battle against the double-headed monsters called inflation and corruption, since both its enemies are growing bigger by the day.
Even as its main tactic of tackling headline inflation by raising policy rates through the Reserve Bank of India (RBI) has repeatedly backfired, food inflation soared to an over 6-month high of 11.43 per cent for the week ending on October 15, with prices of vegetables, fruits and milk going through the roof, literally burning a hole in the common man’s pocket.
“The fact is that food inflation is rising basically because of the fundamental reasons being given by the RBI. It is evident that their monetary policy contraction is clearly not working,” FICCI economist Anjan Roy told The Pioneer.
Food inflation, as measured by Wholesale Price Index (WPI), was at 10.60 per cent in the previous week. This double-digit inflation comes on top of a very high level of price rise recorded in October last year, when it stood at 14.20 per cent, already a “high-base” comparison.
The last time that food inflation stood this high was on April 9 when it was recorded at 11.53 per cent.
Headline inflation, which also factors in manufactured items, has been above the nine-per cent mark since December 2010. It stood at 9.72 per cent in September this year, despite RBI having already hiked interest rates 13 times to tame demand and curb inflation.
However, how successful the Government’s moves have been till date, can be seen from its own data, which can easily cause heartburn to the common man.
While presenting the quarterly review for the current fiscal, RBI Governor D Subba Rao had expressed hope that inflation would taper down by March 2012. However, Roy said that food inflation, which plays a major role in influencing headline inflation, can only come down if agricultural productivity goes up.
“Agricultural productivity has to be boosted if the Government hopes to tame inflation, otherwise all this is (RBI’s views) fine argument,” Roy added.
Crisil economist DK Joshi agreed that riding on good monsoon, food inflation will ultimately climb down, but still it will not reach the comfortable levels of the RBI. “As it is, the last six years average of food inflation comes to around 10 per cent,” he said.
In its second quarterly review of the monetary policy earlier this week, RBI had said that high inflation is likely to persist in the next couple of months before moderating as falling global commodity prices so far has been offset by rupee depreciation.
It projected headline inflation to moderate to 7 per cent by March 2012.
“Food inflation is likely to stay elevated due to demand-supply mismatches in non-cereals and large MSP revisions,” RBI had said, adding that the real wage inflation has extended into first quarter of the fiscal.
Meanwhile, as per Thursday’s latest data, vegetables became dearer by 25 per cent costlier on an annual basis, fruits grew dearer by 11.96 per cent, milk by 10.85 per cent while eggs, meat and fish became dearer by 12.82 per cent, as per the food inflation data released today.
According to the data, even pulses and cereals, which had remained subdued in recent months, have started catching up and became expensive by 9.06 per cent and 4.62 per cent, respectively on annual basis.
However, onions became 18.93 per cent cheaper and prices of wheat and potatoes were also down 0.95 per cent and 0.45 per cent, respectively, year-on-year during the week under review.
Even as its main tactic of tackling headline inflation by raising policy rates through the Reserve Bank of India (RBI) has repeatedly backfired, food inflation soared to an over 6-month high of 11.43 per cent for the week ending on October 15, with prices of vegetables, fruits and milk going through the roof, literally burning a hole in the common man’s pocket.
“The fact is that food inflation is rising basically because of the fundamental reasons being given by the RBI. It is evident that their monetary policy contraction is clearly not working,” FICCI economist Anjan Roy told The Pioneer.
Food inflation, as measured by Wholesale Price Index (WPI), was at 10.60 per cent in the previous week. This double-digit inflation comes on top of a very high level of price rise recorded in October last year, when it stood at 14.20 per cent, already a “high-base” comparison.
The last time that food inflation stood this high was on April 9 when it was recorded at 11.53 per cent.
Headline inflation, which also factors in manufactured items, has been above the nine-per cent mark since December 2010. It stood at 9.72 per cent in September this year, despite RBI having already hiked interest rates 13 times to tame demand and curb inflation.
However, how successful the Government’s moves have been till date, can be seen from its own data, which can easily cause heartburn to the common man.
While presenting the quarterly review for the current fiscal, RBI Governor D Subba Rao had expressed hope that inflation would taper down by March 2012. However, Roy said that food inflation, which plays a major role in influencing headline inflation, can only come down if agricultural productivity goes up.
“Agricultural productivity has to be boosted if the Government hopes to tame inflation, otherwise all this is (RBI’s views) fine argument,” Roy added.
Crisil economist DK Joshi agreed that riding on good monsoon, food inflation will ultimately climb down, but still it will not reach the comfortable levels of the RBI. “As it is, the last six years average of food inflation comes to around 10 per cent,” he said.
In its second quarterly review of the monetary policy earlier this week, RBI had said that high inflation is likely to persist in the next couple of months before moderating as falling global commodity prices so far has been offset by rupee depreciation.
It projected headline inflation to moderate to 7 per cent by March 2012.
“Food inflation is likely to stay elevated due to demand-supply mismatches in non-cereals and large MSP revisions,” RBI had said, adding that the real wage inflation has extended into first quarter of the fiscal.
Meanwhile, as per Thursday’s latest data, vegetables became dearer by 25 per cent costlier on an annual basis, fruits grew dearer by 11.96 per cent, milk by 10.85 per cent while eggs, meat and fish became dearer by 12.82 per cent, as per the food inflation data released today.
According to the data, even pulses and cereals, which had remained subdued in recent months, have started catching up and became expensive by 9.06 per cent and 4.62 per cent, respectively on annual basis.
However, onions became 18.93 per cent cheaper and prices of wheat and potatoes were also down 0.95 per cent and 0.45 per cent, respectively, year-on-year during the week under review.
