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High food inflation pinches consumers hard

business Updated: Sep 13, 2014 01:06 IST
HT Correspondent
HT Correspondent
Hindustan Times

India's retail inflation grew 7.8% in August, marginally lower than the previous month's 7.96%, latest price data released on Friday showed, but concerns remained over high food inflation.

Retail prices of almost all everyday products and services from food to footwear and movie tickets to medicines - remained high in August, signalling India's inability to control household inflation, partly stoked by a sharp rise in food prices.

Consumer food price inflation (CFPI), a measure of how costly the platter has become, galloped towards the worrisome double-digit mark at 9.42% in August, a rise from the previous month's 9.36% increase.

The devil of the fresh price indices lay in its detail.

On a year-on-year basis, vegetable prices grew 15.15%, while fruit prices recorded the sharpest increase at 24.27%. Cereal prices grew 7.39% in August.

Prepared meals' prices - a proxy for restaurant meal rates - rose 7.78%, primarily because of soaring vegetable prices and high rental costs.

This isn't good news for households with the Reserve Bank of India (RBI) likely to hold interest rates at higher levels to tame inflation.

Finance minister Arun Jaitley has signalled the government's intent to walk the talk on price control, announcing a string of decisions to tame inflation including a clampdown on hoarders and raising the minimum export price of onions.

The finance minister also asked the states to immediately crack down on speculative hoarding.

Eggs, fish and meat were costlier at 7.71% during the month. Inflation in rural and urban areas in August was 8.35% and 7.04% respectively. In July, it was 8.37% and 7.42%.

"While the moderation in CPI is a good sign, threats to inflation continue to prevail , primarily as global geopolitical tensions remain elevated. Going ahead, CPI is estimated to remain within the range of 7-8% in the current fiscal," said Madan Sabnavis, chief economist of Care Ratings.

"We do not expect the central bank to change its stance in the upcoming credit policy announcement expected later this month and thereby repo rate is likely to remain unchanged," he added.