Fuel price hike to stoke inflation further: Sen

NEW DELHI: The fuel price increase will stoke inflation further, putting pressure on the government and the central bank to take more measures soon, the country’s chief statistician Pronab Sen said on Tuesday.

“You (are) already in inflationary process. The non-food inflation is accelerating. In that situation, this can actually trigger off stronger inflation process,” Mr Sen said on the sidelines of a function to mark the Statistics Day.

Elaborating on the impact of the hike in fuel prices, Mr Sen said, “When fuel price is increased, it generally pulls resources from other forms of expenditure. So it normally (has) a depressing impact (on economy).”

WPI inflation in May stood at 10.16%, while food inflation was 16.9% for the week ended June 12. Speaking at a statistical conference in Mumbai on Tuesday, Reserve Bank deputy governor Subir Gokarn said containing high food prices is a dominant policy concern.

"The dominant concern from the last few months is food prices. It is still a central factor in macro economic...and it has created a huge challenge in terms of the impact of monetary action on control of inflation," Mr Gokarn said.

He said that food prices are not high just because of weak monsoon and poor rainfall, and they acted as mere triggers. "There is a need to understand what is driving food prices. This is an analytical issue. The dynamics of food prices is not the result of one failed monsoon. It is just a triggering factor," Mr Gokarn said.

It is expected that the RBI may raise short-term lending and borrowing rates at its monetary review on July 27.