Food inflation soars to 18.32%

Food inflation shot up to nearly a year's high of 18.32 per cent on December 25 due to a spurt in vegetables, onion and milk prices even as the Finance Ministry's pointman expressed helplessness, saying prices are not "fully" within the control of the government.

While economists felt that the soaring food prices would exert pressure on the government and RBI to intervene, Chief Economic Adviser in Finance Ministry Kaushik Basu said he agreed with Home Minister P Chidambaram's remarks yesterday that the government did not have full control over prices.

The wholesale food inflation jumped by 3.88 percentage points from 14.44 per cent in the previous week ending December 18, 2010 taking government by surprise.

A huge increase of over 82 per cent in onion prices and 58.85 per cent in vegetables led to the overall increase in food inflation.

After declining for a brief period, onion prices have started rising again and may go up further following Pakistan banning onion exports through land route of Wagha border.

The other items that contributed to price rise were egg, meat and fish (up 20.83 per cent), fruits (19.99 per cent) and milk (19.59 per cent) Food inflation in the corresponding week last year was 19.90 per cent

Expressing helplessness, Basu said,"I mean this is a huge country in terms of population and land area. It is an utter mistake to think that it is fully within the control of the government to move prices of food up and down.

"Government is just an enabling body, there are little local bodies taking decisions, there are private players taking decisions, farmers taking decisions . Government can give signals, can intervene strategically to keep the situation as much under control as possible,"Basu said.

Indicating that the government was taken by surprise, he said while hike in food inflation was likely, it was not expected to the extent of over 18 per cent.

Basu echoed Chidambaram who yesterday had said,". Nor am I sure whether we have at our hand all the tools to control inflation. Some say we do, some say we don't (have tools to check price rise). At least in case of food inflation, I have not heard anyone arguing convincingly that we have all the tools to control food inflation."

Expressing concern, Finance Minister Pranab Mukherjee said,"These are weekly (figures). Let us wait for monthly figures. These are weekly variations, but is a matter of concern".

Having raised the key interest rates for six times in 2010, the RBI is expected to again hike them in its next policy review on January 25 to cool down inflation.-PTI