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Price monster returns to your doorstep

Food inflation is back in double digits - at 12.13% - its highest level in six weeks. What's scary is this figure doesn't factor in the rise in vegetable prices over the last few days. Gaurav Choudhury reports. Rising costs dampen Yuletide spirit

business Updated: Dec 24, 2010 00:32 IST
Gaurav Choudhury

Food inflation is back in double digits - at 12.13% - its highest level in six weeks. What's scary is this figure doesn't factor in the rise in vegetable prices over the last few days.

Once rising vegetable prices, last week's petrol price hike and the expected increase in cooking gas and diesel prices next week are accounted for, overall inflation rate - at 7.48% last month - will shoot up sharply.

Result: your monthly household budget will need to be recast considerably and your EMIs may also rise as the Reserve Bank (RBI) is expected to raise interest rates to cool prices. You may have to cut down on a few indulgences, like eating out.

"I'm concerned about inflation. That's one of the challenges at the macro-economic level... It is a struggling exercise we are doing," finance minister Pranab Mukherjee said on Thursday.

There's a bigger scare around the corner: if interest rates rise, consumer demand will fall, companies may hold back planned investments and growth rates in the broader economy could suffer.

Earlier this month, the government had projected the economy to grow at about 9%. It grew at 8.9% in the April-October period.

Cabinet secretary KM Chandrashekhar held a meeting with a committee of secretaries on Thursday morning to take stock of the situation.

It's not only onion that has the government worried. Tomato, eggs, fish, meat and milk have all become costlier, pushing up food inflation by nearly three percentage points in the week-ended December 11 compared to the previous week's 9.46%.

Worse, prices of crude oil have touched $90 (Rs 4,140) a barrel.

A ministerial panel will consider a proposal to raise diesel and cooking gas prices on December 30 to help cushion state-owned oil firms from rising global crude prices, but this could fan prices of most products as transportation cost go up.

Oil companies raised petrol prices last week by nearly Rs 3 a litre.

Rising costs dampen Yuletide spirit