Food inflation moves up marginally to 8.76%

The latest number of 8.76 per cent is also the highest in three weeks, after a brief phase of downward trend in March. Headline inflation has been above 8 per cent since January 2010.
Considering sensitivity over further tightening of monetary policy RBI Governor D Subbarao is expected to have consultations with the finance ministry before finalizing the annual credit policy.

Finance Minister Pranab Mukherjee said “we will have talks with RBI Governor prior to the announcement of credit policy”. Analysts say marginal rise in food inflation, which stood at 8.74 per cent in the previous week, will put pressure on overall inflation, which stood at 8.98 per cent in March—much above the tolerable level of 4 to 5 per cent prescribed by the Reserve Bank of India.

This is the second consecutive week when the rate of price rise of food items has gone up after a period of moderation in February and March. A study by Asian Development Bank (ADB) has cautioned that soaring food prices, which averaged 10 percent in many economies this year, can push close to 30 million Indians and 64 million people in the Asian region into extreme poverty.

The RBI meeting on May 3, which will fix the policy for 2011-12, comes at a time when the industrial growth has started showing signs of lagging and inflationary pressure continues to pose a threat to the economy. Experts say RBI would hike its key policy rates by at least 25 basis points on May 3 to contain rising inflation.