Inflation climbs to 8.43% in Dec;rate hike by RBI on the cards

New Delhi, Jan 14 (PTI) Adding to the woes of the
government, the overall inflation in December shot up to 8.43
per cent mainly due to rising food prices, a development that
may prompt the RBI to raise key interest rates later this
month to check price rise.
Terming the current rate of inflation as "unacceptably
high", Indian Finance Minister Pranab Mukherjee Friday said he
would discuss the issue with state finance ministers on
January 19 to take concerted efforts to moderate prices.
The government had Thursday announced a slew of measures
to tame inflation by deciding to continue ban on exports of
edible oils, pulses and non-basmati rice and asking states to
waive local taxes on essential commodities.
"Whenever the appropriate adjustment of the crucial rates
is called for in the larger interest of the economy, including
the price stabilistion, the RBI takes appropriate policy in
consultation with the government," Mukherjee told reporters.
However, experts doubt the effectiveness of monetary
policy to tame high food prices as any such action may impact
the growth.
"RBI is expected to raise key short-term rates by 25-50
basis points later this month, ...it has no link with food
inflation and is likely to hurt growth," HDFC Chairman Deepak
Parekh had said yesterday.
World Bank Group Preisdent Robert Zoellick, who is in
India on a four-day visit, said it (high food inflation) was
mainly due to the supply side constraints.
"My own sense in the case of the Indian economy is that
some of the inflationary pressures are more likely a function
of some of the bottleneck on the supply side than they are
from the demand side," he said.
The contribution of food inflation to overall inflation
could be gauged from the fact that 'manufactured' inflation,
in fact, came down to 4.46 per cent in December from 4.56 per
cent in the previous month.
It could also be assessed from the fact that these
are mainly vegetable prices which have already risen during
the month.
Vegetable prices rose by 22.90 per cent in December
versus the previous month. Within vegetables, onions turned
expensive by 34.86 per cent and potato by 16.29 per cent.
Other items moved in a narrow range, with the highest
price rise seen in fibres (4.09 per cent) and minerals (3.4
per cent).
Food inflation remained high throughout in December and
touched 18.32 per cent before coming down to 16.91 per cent
for the week ended January one.
"Food inflation at this level is not acceptable and we
are trying our best to control it along with the cooperation
of state governments," Mukherjee said. PTI JD
ASR


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