INFLATION GOES UP TO 0.83%

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THE wholesale price-based inflation for the week ended September 19 rose to 0.83% from 0.37% in the previous week on costlier food items.

   Inflation in food articles for the week under consideration was at an eleven-year high of 16.32%, causing some concern in the government.”Whenever inflation goes up, it is a matter of concern,” finance minister Pranab Mukherjee told reporters in the capital after inflation numbers were released.

   With more than 40% of India’s districts declared drought hit, the high inflationary expectations have pushed up prices of food articles. But economists and agri-commodity analysts pointed out that the prices of food items should start moving down as the kharif produce (summer crops) comes to the market in coming weeks.

   The prices of food articles did no go up sharply in the last two severe droughts faced by the country, in 1987-88 and 2002-03. During these years, food price inflation was less than 3-4% and even overall consumer price inflation remained low, insulating the poor from the impact of drought. But currently retail inflation as measured by the three consumer price indices is hovering around 12%.

   What makes the current drought different from the earlier ones, which resulted in shortages of cereals and pulses, is that this time the shortage is witnessed largely in perishables such as vegetables, fruits and dairy products.

   “There is not much that the government can do to bring down prices of these items,” said Madan Sabnavis, chief economist at NCDEX, the country’s largest agriccommodity exchange by turnover. But he expects the annual inflation for food items to come down.

   High food prices have resulted in a number of electoral upsets in the past. With state elections in Maharashtra, Haryana and Arunachal Pradesh round the corner, the rising inflation becomes a concern. the sub-indices of the WPI, which measures annual inflation for manufactured items and fuel items, remained subdued over the week.

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