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Supply disruptions drive food inflation to 16.44%

Posted by cvbasheer on October 1, 2010

Continuing its march for the fifth straight week, food inflation surged further to 16.44 per cent for the week ended September 18 from 15.46 in the previous week, mainly driven by higher prices of essentials following supply disruptions on account of heavy rains and floods.

Commenting on the nearly one percentage point increase in the Wholesale Price Index (WPI) based inflation data, Finance Minister Pranab Mukherjee expressed concern over the spiralling food prices. “Inflation has increased, and particularly a number of food items like jawar or bajra and pulses, fruits, vegetables, meat, eggs… All these food items’ prices have increased. As a result, the WPI on food items has increased by more than half a percentage point. This is an area of concern,” he said.

Alongside, however, Mr. Mukherjee also exuded confidence that prices would ease after the monsoon and the monetary measures put in place would start yielding dividends. Economic analysts also hold the similar views as the Finance Minister and expect prices to come down once the monsoon withdraws and kharif crops start arriving in the market. “Once kharif output arrives in the market post October, and supply constraints are lessened as rain recedes, inflation will come down,” Crisil’s chief economist D. K. Joshi said.

Supply of essentials were disrupted in many northern parts of the country, including Delhi, Haryana, Punjab, Uttar Pradesh, Himachal Pradesh, Assam and Rajasthan which have had torrential rains and floods.

On a year-on-year basis, prices of cereals were up 6.11 per cent owing to higher prices of pulses, rice and wheat. While pulses were dearer by 5.94 per cent, wheat and rice turned costlier by 9.14 per cent and 4.05 per cent, respectively.

Transportation constraints also impacted fruit and vegetable prices which surged by 15.13 per cent and 5.87 per cent, respectively. Likewise, other food items such as milk soared by 24.32 per cent during the week as compared to the same week last year.


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