Bloomberg News

India Food Inflation Accelerates to 6-Month High of 11.4%

October 27, 2011

(Updates with comment from economist in fourth paragraph.)

Oct. 27 (Bloomberg) -- India’s food inflation rate rose to the highest level in more than six months on higher prices of cereals, vegetables, eggs, meat and fish.

An index measuring wholesale prices of agricultural products gained 11.43 percent in the week ended Oct. 15 from a year earlier, the commerce ministry said in a statement in New Delhi today. It rose 10.6 percent the previous week.

Lower production of pulses and inadequate egg and meat supplies may put pressure on food prices, the Reserve Bank of India said this week as it raised interest rates for the 13th time since the start of 2010. Still, the central bank signaled it’s nearing the end of monetary tightening as growth slows.

“The pressure on food inflation will continue, but it will be manageable unless there is a shock,” said Prasanna Ananthasubramanian, a Mumbai-based economist at ICICI Securities Primary Dealership Ltd. “The known factors exist and they can be controlled.”

Reserve Bank Governor Duvvuri Subbarao has raised the benchmark rate by 375 basis points since mid-March 2010, the fastest round of increases since the central bank was established in 1935, Bloomberg data show. India’s benchmark wholesale-price inflation was 9.72 percent in September, having stayed above 9 percent all this year.

Inflation will start to decline from December and ease to 7 percent by March before moderating further in the first half of the new fiscal year starting April 1, the central bank said this week. Beyond December, “if the inflation trajectory conforms to projections, further rate hikes may not be warranted,” the bank said.

In the week ended Oct. 15, cereal costs rose 4.6 percent from a year earlier, today’s report showed. Prices of vegetables surged 25 percent while eggs, meat and fish climbed 12.8 percent.

--Editors: Stephanie Phang, Sam Nagarajan

To contact the reporter on this story: Unni Krishnan in New Delhi at ukrishnan2@bloomberg.net.

To contact the editor responsible for this story: Stephanie Phang at sphang@bloomberg.net


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