Finance Minister concerned as food inflation jumps to 9.8%

NEW DELHI: A sharp rise in the prices of fruit and vegetables again pushed up food inflation close to double digits, prompting the government to call the situation disturbing.

Food inflation accelerated to 9.8% for the week ended August 13 from 9.03% in the previous week, data released on Thursday showed. Food prices rose 0.4% over the previous week.

Food inflation has increased again from 7.33% in mid-July, compounding the problems for policymakers.

"The bad news is that inflation has increased...it is disturbing... I am more concerned about food inflation, which is perilously near double digits," said Finance Minister Pranab Mukherjee.

Onion price soared by 44.42% year-on-year, while potato were dearer by 16.39% from a year ago. While prices of fruit increased by 27.01%, eggs, meat and fish were dearer by 13.37% on an annual basis.

Economists say such fluctuations in inflation would continue on a weekly basis and that prices could see a further spurt in the week ended August 20 due to excessive rainfall in certain areas.

"The price index for fruit and vegetables may rise further in the week ended 20 August because of supply disruptions in some areas following heavy monsoon rainfall during that week," said Aditi Nayar, economist for ratings firm ICRA.

The government does not want to give too much importance to weekly fluctuations, though. "As I have always maintained, weekly inflation figures are variant. We should make an assessment on the basis of a relatively longer period," said Mukherjee.

Crisil chief economist DK Joshi expects food inflation to moderate but remain in the 7%-8% range. "With monsoons being near normal food inflation will moderate going forward."

The Reserve Bank of India has raised its key interest rates 11 times since March 2010 to tame headline inflation, which stood at 9.22% in July. The RBI expects overall inflation to start easing by November-December.

Inflation in primary articles rose to 12.4% from 11.64% in the previous week. Inflation in fuel basket remained stable at 13.13%.