April inflation rises sharply to 7.23 per cent

April inflation rises sharply to 7.23 per cent

Only reforms can check farm prices: FM

Driven by higher prices of food, fuel and manufactured goods, India’s headline inflation in April rose above 7 per cent, compounding worries of the government and Reserve Bank of India already fighting dipping industrial growth and slowing economy.

Expressing concern over the pick up in prices, especially food items, which have again entered double digit, Finance Minister Pranab Mukherjee said farm product prices can be checked only through institutional reforms and that he will discuss the issue with states.

April inflation rose unexpectedly on the back of a 10.49 per cent jump in food prices from 9.94 per cent in March. Food articles account for 14 per cent of the wholesale price index (WPI). Fuel price, which account for 15 per cent of the index, were up 11.03 per cent.
Non-food manufactured products, which account for a bulk of 65 per cent of WPI, also increased by 5.12 per cent from 4.87 per cent in March.

The prices of vegetable, egg, meat and fish also surged substantially with pressure on their output, the inflation data showed.

Analysts said increasing welfare spending by the government has given rise to consumption pattern and fanned inflation, while supply constraints remain unaddressed in the country. Storage and supply have been the main reasons behind soaring food inflation despite increasing availability of food grains in the country in the past few years.

India’s foodgrain production has increased from 218.11 million tonnes in 2009-10 to 245 mt in 2010-11. The output is estimated to be over 252 mt in 2011-12.

High fuel prices and depreciating rupee have also put pressure on soaring inflation, which is unlikely to relent in the coming months with transport fuel prices almost certain to be revised upward by the end of this month.

Adding fuel to the fire, country’s industrial growth contracted sharply by 3.5 per cent in March, underlining a fresh slowdown fear in the economy, which expanded only  6.1 per cent in December quarter, the slowest in nearly three years.

The latest inflation data also kept the volatility in the rupee alive. The rupee fell to 53.74 per dollar from around 53.65 after the release of the inflation data by ministry of commerce and industry.

Disappointed over the latest inflation print, Prime Minister’s Economic Advisory Council Chief C Rangarajan said the numbers were very uncomfortable and may not hold good for the RBI to go in for policy rate cut in the near future.

The RBI has already indicated that a rate cut will be possible only if inflation remains under check in the coming weeks.

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