Food inflation zooms

Food inflation accelerated to its highest in more than three months, making it difficult for the Reserve Bank of India to pause interest rate hikes despite global economic uncertainty and deceleration in industrial growth. Prices rose 9.9% for the week ended July 30 from a year ago, the highest rate of increase since the third week of April, data on Thursday showed. For the week ended July 23, food inflation was 8%. Inflation in fuel and power category remained almost unchanged at 12.2% for the week, against 12.1% in the previous week. The acceleration in food articles was because of an across-the board rise in prices during the week, with egg, meat and fish rising the fastest by nearly 6%. The overall food price index was up a sharp 1.6% during the week ended July 30. Prices of onions, potatoes, fruits, and cereals also rose during the week. Though inflation in food articles is largely seen driven by rising input costs and supply constraints, the RBI has been worried that it could cause a vicious wage-price spiral. RBI’s Inflation Expectations Survey of Households shows inflation to be at 12.9% one year later. The central bank is coming under increasing pressure to pause rate increases that have seen rates rise 300 basis points since March 2010. Food articles have a 14.3% weight in the wholesale price index. Acceleration in food inflation could spike up the overall inflation numbers for July due on Friday.