Dismiss Notice
Welcome to IDF- Indian Defence Forum , register for free to join this friendly community of defence enthusiastic from around the world. Make your opinion heard and appreciated.

Food inflation surges; RBI rate hike seen

Discussion in 'World Economy' started by DaRk KnIght, Sep 30, 2010.

Thread Status:
Not open for further replies.
  1. DaRk KnIght

    DaRk KnIght Lt. Colonel ELITE MEMBER

    Apr 14, 2010
    Likes Received:
    India's annual food price inflation continued to quicken in mid-September and analysts see another rate increase by the year end as the Reserve Bank of India (RBI) acts to stamp down persistently high inflation.

    The RBI has said emerging macroeconomic conditions, especially prices, would determine its future action, with five rate hikes since mid-March having brought monetary conditions close to normal.

    The RBI projects headline inflation to ease to 6 percent by March, when the current financial year ends, from 8.5 percent in August, but noted in its September policy review that food prices continued to contribute to inflationary pressures.

    Food prices make up around 14 percent of the wholesale price index (WPI), the most widely watched gauge of prices in India.

    Data released on Thursday showed the food price index in the year to Sept. 18 rose 16.44 percent, compared with 15.46 percent in the previous week, on higher prices of pulses, onions and vegetables.

    It was the second straight rise under a new data series -- with a different base year of 2004-05, new components and weightings -- that was introduced in the week to Sept. 4.

    Policymakers and analysts expect food prices to ease on good harvests, but recent heavy rains have disrupted supplies and pushed prices up.

    The fuel price index rose 10.73 percent, slower than the week-ago's 11.48 percent. The primary articles index was up 18.31 percent, compared with 16.80 percent in the previous week.

    India's foreign exchange, bonds, swaps and overnight cash markets are shut on Thursday for the half-yearly closing of banks' accounts. Trading resumes on Friday.

    The RBI last raised its repo rate, the rate at which it lends to banks, on Sept. 16 by 25 basis points to 6 percent. Analysts expect another quarter-point rise in the repo by the year end.

    High food prices are a political hot potato in India, where more than 40 percent of the 1.2 billion population live on less than $1.25 a day, and could mar the chances of the ruling Congress party in crucial state elections this year and next.

    In 1998, voter anger over a spike in onion prices helped the Congress wrest three states from the opposition Bharatiya Janata Party. A similar rise in 1980 contributed to the fall of Janata Party federal government.

    (Reporting by Matthias Williams; writing by C.J. Kuncheria; editing by Malini Menon)

    Food inflation surges; RBI rate hike seen - Yahoo! India News
Thread Status:
Not open for further replies.

Share This Page