Food inflation drops to 16.30% y-o-y on March 6

Reserve Bank of India faces the dilemma of balancing government's need to borrow $100 bn in FY-11 with taming inflation.

By Agencies | Mar 18, 2010, 12.04 PM IST

NEW DELHI: Food inflation fell to 16.30 per cent for the week ended March 6 on easing prices of pulses and vegetables, but fuel inflation shot up to 12.68 per cent. (Watch)

For the previous week, food inflation was at 17.81 per cent and fuel inflation at 11.38 per cent.

Vegetable prices showed a marked decline of more than 10 per cent over the week, followed by about 4 per cent fall in prices of pulses. Urad and arhar prices was down 6 per cent each during the week.

However, the easing in food prices has been marred by rising fuel inflation giving no respite to the overall inflation that has been consistently rising since it came out of sub-zero levels in September last year.

The fuel index comprising fuel, power, light and lubricants saw an inflation of 12.68 per cent over the week led by 16.82 per cent inflation in petrol prices and 14.99 per cent in diesel prices.

The rise in fuel prices is as a result of the budgetary announcement of a hike in excise and customs duty on petrol and diesel.

The overall inflation has risen to 9.89 per cent for February from a low of 1.34 per cent in October last year, primarily led by high food prices.

Overall the inflation has already breached the RBI's projection of 8.5 per cent for the fiscal-end in January when it touched 8.56 per cent.

Key policymakers have said that headline inflation would moderate over the next two months.

The RBI faces the dilemma of balancing the government's need to borrow a record $100 billion in the next fiscal year with taming inflation.

Rising prices have sparked opposition-backed street protests and made India's government reluctant to push through reforms such as relaxing fuel price controls, even though the ruling Congress party faces no risk of losing power anytime soon.

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