New Delhi, January 06: Soaring onion and other vegetables’ prices led to a sharp rise in inflation at 18.32 per cent for the week ended December 25, a development that may prompt the Reserve Bank to tighten monetary policy to check further escalation in commodity costs.
Food inflation jumped up by 3.88 percentage points from 14.44 per cent recorded in the previous reporting week, and edged closer to the high level of 19.90 per cent, last witnessed a year ago.
The rise in food inflation has been mainly on account of 58.58 per cent rise in prices of vegetables in the wholesale market.
Among the individual items, onion became dearer by 82.47 per cent on annual basis, while egg, meat and fish became costlier by 20.83 per cent, fruits by 19.99 per cent and milk by 19.59 per cent.
The data further reveals that onion prices during the one week period ending December 25, rose by 23.01 per cent in the wholesale market.
With food inflation accelerating, RBI may take more measures in its forthcoming quarterly review of the monetary policy on January 25.
The central bank during 2010 had raised short-term key policy rates six times to tame inflation.
Meanwhile, in the non-food category, the prices of fibres and minerals have climbed by 35.53 per cent and 30.58 per cent, respectively.
Rising food prices will reflect on the monthly inflation data for December, scheduled for announcement on January 14.
The overall inflation in November had come down to 7.75 per cent from 8.58 per cent a month ago.
In his speech on Wednesday, the home minister P Chidambaram said price stability was extremely important particularly in a poor country. “There is no tax worse than inflation.”
Prime Minister’s economic adviser C Rangarajan said there is a need to guard against food inflation spreading to other sectors and price stability has to be the dominant issue for monetary policy in the country.
Rangarajan, a former Reserve Bank of India governor and a noted economist, said the government can deregulate diesel prices when inflation eases. He said monetary policy action would be needed if inflation continues to be sticky.
-Agencies