Food inflation is worrying, rues Pranab
Food articles contribute more than 14 per cent to overall WPI
As food inflation breaches double digit mark with a potential to whittle down overall economic growth, Finance Minister Pranab Mukherjee, on Friday, said the government will try to remove the supply side constraints that were keeping food prices high.
A government data showed the annual food inflation at 8-month high of 10.6 per cent in the week to Oct 8 while fuels were costlier by 15 per cent.
“I am worried food inflation has reached double digit scenario. It was perilously close to double-digits in the last two weeks. It has now crossed that,” Mukherjee told reporters in New Delhi.
Supply constraints
“We shall have to ensure that supply side constraints are addressed which is the main reason for food inflation,” he said.
Food articles contribute more than 14 per cent to the overall wholesale price index and it is feared a spurt in food prices could keep the headline inflation near 10 per cent in October.
Government is worried over high inflation and sagging industrial growth. It also exerts added pressure on The Reserve Bank of India to go in for another hike in its policy rates on October 25.
The headline inflation at 9.72 per cent in September was a tad lower than 9.78 per cent in Aug but way above RBI's comfort zone.
Meanwhile, ahead of the monetary policy review, RBI Governor, D Subbarao discussed macro economic situation with the finance minister which could have included inflation and rupee depreciation.
Before the meeting, Mukherjee had said he would talk to Subbarao on rupee fall that was raising costs of fuels and foods, widening the subsidy bill and fanning inflation.
Since 2010, RBI has raised the policy lending rate repo a dozen times by 350 bps to anchor inflationary expectations and tame inflation, but met with limited success.
Earlier, in the day the Finance Minister emphasised the need for better coordination between the Government and RBI.
He said the global economic developments has “once again brought into focus the need for better co-ordination between monetary and fiscal policies towards improving overall economic stability and growth”. Subbarao and Mukherjee also discussed the situation arising out of the rupee weakening to a 28-month low and crossing 50 to a dollar mark.
