Inflation up, but still in negative zone; food prices rise

New Delhi, Aug 20 (PTI) After declining to a three
decade-low the previous week, inflation rose marginally to
(-)1.53 per cent even as food prices continued to be dearer
amid an erratic and deficient monsoon.

The government on Thursday hiked the minimum support
prices for paddy by Rs 100 a quintal and pulses by upto Rs 240
a quintal. Analysts said the government's move would make
pulses and cereals more expensive.

The rise in inflation is according to the Reserve Bank's
expectations. Earlier in the week, RBI Deputy Governor K C
Chakrabarty had said that the erratic monsoon might put
pressure on inflation and food prices would rise in coming
months as below normal rainfall had reduced the Kharif sowing.

Some analysts believe that the RBI would now be forced
not to change the interest rates.

Inflation rose by 0.21 percentage points during the week
ended August 10 from a three-decade low of (-) 1.74 per cent
in the previous week.

Essential items like fruits turned expensive by 2.6 per
cent, bajra and urad by two per cent each, and condiments,
spices and arhar by one per cent each.

If one looks at year-on-year comparison, prices of food
items rose much more exorbitantly.

For example, prices of vegetables rose close to 40 per
cent, cereals 11.6 per cent, pulses 17.6 per cent, condiments
and spice by 4.7 per cent.

With inflation remaining in negative territory and
food prices rising, RBI may be forced to keep interest rates
intact.

"RBI will keep policy rates unchanged till first quarter
of the next fiscal," Crisil Principal Economist D K Joshi
said.

Inflation rose despite high base effect of 12.82 per cent
a year ago. This means, that rise in inflation would have
looked much more had the last year's figure been less.

"The drought has worsened the situation. But inflation
will remain in negative territory till September end," HDFC
Bank economist Jyotinder Kaur said.

She said inflation would rise thereafter to reach 7-7.5
per cent by end of this fiscal.

Joshi said inflation would be above 5.5 per cent by that
time.

Prices of processed food items also showed a rising
tendency. Khandsari and rice bran oil were expensive by three
per cent each, while imported edible oil, sooji and Cotton
seed oil were up by two per cent each, and maida, ghee and oil
cakes by one per cent each.

On an yearly basis, canned fish rose by 42.75 per cent,
tea and coffee processing by 14.5 per cent and oil cake by
6.27 per cent.

Inflation rose despite certain category of fuels turning
cheaper. Light diesel oil was down two per cent and naphtha by
one per cent. PTI BSP
SDE
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