Food inflation inches up to 15.57 per cent

New Delhi: Dearer vegetables pushed up the food inflation marginally to 15.57 per cent for the week ended January 15, prompting experts to say that RBI may go for yet another round of rate hike in its mid-quarterly policy review in March.

Food inflation was 15.52 per cent for the week ended January 8. It was 20.07 per cent a year ago.

Based on price movement in the wholesale market food inflation rose by 0.05 percentage points for the week ended January 15 after declining for two consecutive weeks.

While the vegetable prices soared by 67.07 per cent on an annual basis, onion became expensive by 111.58 per cent. Onion prices, however, have declined recently on account of the government initiatives like ban on its export and making available the essential kitchen item from state-owned entities.

Besides vegetables, fruits, milk and other protein-based items became expensive during the week. The prices of wheat and pulses, however, witnessed a decline.

“We believe some more rate hike is on the cards and the inflation rate is not showing signs of abatement,” Crisil Chief Economist D K Joshi said, while commenting on marginal rise in food inflation.

Expressing similar opinion, ICRA economist Aditi Nayar said: “The RBI is likely to hike its short-term lending and borrowing rates by 25 basis points in its March review and again by the same rate in the first quarter of 2011-12.”

The central bank in its quarterly review of the monetary policy on Tuesday raised the short-term lending (repo) and borrowing (reverse-repo) rates by 25 basis points to check inflationary expectations.

Given the current trend of price rise, RBI raised the March-end forecast of headline inflation to 7 per cent from 5.5 per cent earlier.

The mid-quarterly policy will be announced by the RBI on March 17.

The experts, however, feel that food prices will moderate in the coming months.

“Going ahead we believe food inflation will come down,” Joshi said, adding that food inflation largely depends on seasonal factors, “specially vegetable prices.”

According to Nayar: “Food prices are extremely volatile due to the perishable nature of many commodities. We believe that by the end of January the prices of vegetables will come down and this will show in the food inflation figures by February.”

Experts, however, cautioned against rising crude oil prices in the international market and said it could play a spoilsport in the overall inflation.