Inflation grows to 7.31 per cent, worries Centre

Exceeds RBI forecast of 6.5 per cent

The ongoing rise in prices of essential commodities, is increasingly becoming politically sensitive with opposition parties criticising the UPA government for its inability to control price rise.

Only on Wednesday, the government had announced slew of measures to rein in food prices especially that of sugar and food-grains.

As per the data prices of processed food items swelled at the rate of 26.4 per cent in December while non-processed food items became costlier by 19.17 per cent. Sugar price, spiraling rise of which has generated political heat, ballooned by 53.98 per cent in December compared to the price prevailing in same month in 2008.

As the data show potato prices more than doubled while pulses became more expensive by over 47 per cent compared to price prevailing an year ago.

However the food inflation measured for the week ending January 2 this year has come down to 17.28 per cent from 18.22 per cent a week ago.

Still as per the latest food inflation data prices of pulses, potatoes and onion went up during the week ending January 2 as compared to prices prevailing in the corresponding period year ago.  It is being apprehend that continuing rise in food prices will further aggravate the overall inflation rate. If the overall inflation rate, which has already crossed 7.31 per cent in December, further rises it will compel the RBI to adopt tight monetary policy by hardening overall interest rate.

Rise in interest rates for lending will make all sorts of borrowings ranging from personal, car and consumer loans to loans for commercial purposes, expensive. Trade and industry have already cautioned that further hike in borrowing rates would make the fund more expensive, which would come on the way of further expansion of business activities and investment.