India food inflation edging close to double-digit

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SME Times News Bureau | 11 Aug, 2011
There seems to be no respite from rising food prices for the common man as official data released Thursday showed India's annual food inflation had risen sharply to 9.9 percent for the week ended July 30.

Food inflation had spiked to 8.04 percent in the week ending July 23 after a brief lull.

The latest rise in food inflation has been caused by rising prices of vegetables, especially onions, eggs, meat and fish, fruits and milk -- basically everything a household requires everyday.

The primary articles index reported an increase of 12.22 percent for the week under review as compared to 10.99 percent in the previous week, according to data released by the Commerce and Industry ministry.

The index for fuels and power, which has a 14.91 percent weight in the wholesale price index, inched higher at 12.19 percent percent during the week under review from 12.12 percent in the previous week.

The headline inflation levels still remain close to double digits.

The latest spike in food inflation will again put the Reserve Bank of India (RBI) in a quandary as it has already hiked key interest rates 11 times since January 2010 to tame inflation.

The frequent hikes have made credit costlier and industry has been clamouring for a stop to the rate increases. In a surprising move, the RBI had in July hiked the repo rate by 50 basis points to further moderate inflation.

But with signs of slowing down in industrial output and another financial crisis looming after the US sovereign debt rating downgrade, the RBI will be more cautious in hiking rates.