Now other vegetables join onions, eggs to send inflation soaring (Roundup)

January 6th, 2011 - 6:36 pm ICT by IANS  

Bharatiya Janata Party New Delhi, Jan 6 (IANS) The high cost of onions spread its effect to other vegetables as well, pushing up India’s annual food inflation nearly 400 basis points to the highest level in a year at 18.32 percent for the week ended Dec 25, official data showed Thursday.This was the fifth straight week of sharp rise in food inflation, which stood at 14.44 percent the week before, as per data on official wholesale price index released here by the commerce and industry ministry.

The latest spike in inflation left the government even more worried, particularly after Pakistan banned export of onions to India via the Wagah border, with Commerce Minister Anand Sharma making a strong appeal to Islamabad to reconsider the decision.

“We’ve requested Pakistan that at least those consignments that had already been booked by Indian importers, should be permitted. Our embassy in Islamabad is in touch with the authorities there,” Sharma told reporters here.

But the opposition was scathing in its criticism. “This government has stolen food out of people’s mouths,” said Bharatiya Janata Party (BJP) spokesperson Shahnawaz Hussain. “No item of daily consumption — be it onions or tomatoes — is affordable today.”

The rise in onion prices, due to a crop failure in the main growing regions, and rise in the cost of other essential items like vegetables, poultry, milk and fruits have again raised the spectre of a rate hike by the central bank.

Finance Minister Pranab Mukherjee said the latest data on food inflation was certainly a cause for concern but said since these were short-term statistics, the real picture would emerge when the monthly figures on wholesale prices are released.

“It has moved further. It is an area of concern,” the finance minister told reporters here, adding: “Let’s wait for monthly figures. These are weekly variations, but is a matter of concern.”

Asked Neelam Upadhyay, a retired school teacher in east Delhi: “If I have to spend Rs.70 per kg on onions and Rs.50 a kg on tomatoes, what will I be left with for other things. Even milk and eggs, which I give my grandchildren everyday, are so costly.”

The fresh data reveals how fast prices have galloped during the 52-week period ended Dec 25, particularly of essential commodities:

Onions: 82.47 percent

Vegetables: 58.85 percent

Fruits: 19.99 percent

Potatoes: (-)15.45 percent

Milk: 19.59 percent

Eggs, meat, fish: 20.83 percent

Cereals: (-)0.53 percent

Rice: 1.03 percent

Wheat: (-)5.4 percent

Pulses: (-)10.54 percent

Among steps taken by the government, an empowered group of ministers headed by Mukherjee extended the ban on export of pulses indefinitely, and decide to release additional five million tonnes of wheat and rice to be sold through state-run fair price shops.

Earlier, the central bank, in its mid-quarter review of its monetary policy, kept almost all rates intact, but lowered the amount banks have to retain in the form of bonds, gold and cash to ease liquidity in the system.

The move indicated that the Reserve Bank of India (RBI) was expecting the inflation rate to temper and wanted to make more credit available to industry to ensure that overall growth does not suffer for want of funds.

But with inflation back in double-digit, experts believe the central bank will use all the monetary tools at its disposal to bring it down. An indication to that effect also came recently from the top brass of the monetary authority.

“Inflation is not easing as we would like it to be. Upside risks are still high,” Deputy Governor Subir Gokarn said recently, hinting at what others said was an indication of an imminent rate hike to curb inflationary expectations.

Economists said the government and the monetary authority needed to re-look the stated policies on controlling inflation, going beyond demand-side interventions to the more important supply-side issues.

“Food prices have once again gone up and this shows that monetary policy has become an ineffective tool for containing food inflation,” said Amit Mitra, secretary general of the Federation of Indian Chambers of Commerce and Industry (FICCI).

“Demand for food items such as fruits and vegetables, meat, fish and egg, milk has been increasing. Unless we increase production substantially and address supply bottlenecks, we will not be able to control inflation.”

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