Food inflation under Modi rule inching towards UPA-era highs

On the back of soaring prices of perishables, edibles and beverages in the economy, the food inflation rate in the BJP-led NDA-II regime is closely inching towards the highs witnessed in 2013 during the Congress-led UPA-II. The annual food inflation rate in the month of October stood at 10.87%, jacking up the retail inflation rate to a fourteen-month high of 6.21%.

Interestingly, with the galloping prices, the food inflation rate is slowly approaching the UPA-era highs. In November 2013, food inflation touched an all-time high of 14.72%, rising steadily from an average of 6.15% in 2012.

There has been a sudden spurt in the food inflation rate since August this year, which has almost doubled since then. High prices of vegetables in the country are attributed to the seasonality and heavy rains in some part of the country, causing supply-side constraints.

Amid concerns of price spiral in the domestic economy, RBI Governor Shaktikanta called for a balanced approach towards inflation control and economic growth. A stable inflation or price stability is in the best interest of the people and the economy. It acts as a bedrock for sustained growth, enhances the purchasing power of the people and provides a stable environment for investment,” Das said yesterday at the High-Level Policy Conference of Central Banks from the Global South.

Earlier this week, Finance Minister Nirmala Sitharaman called for a rate cut emphasizing that India needs a “far more affordable interest rate regime”.

“When you look at India’s growth requirements, you can have so many different voices coming out and saying that the cost of borrowing is very stressful and at a time when we want the industry to ramp up and build capacities, bank interest rates will have to be far more affordable,” Sitharaman said at SBI conclave in Mumbai.

Currently the benchmark lending rate – the repo rate – stands at 6.5%. The next meeting of the RBI’s monetary policy committee is in December first week and it remains to be seen what stand the committee will take. With inflation raging, a rate cut may be out of the question in the next meeting of the MPC.

Meanwhile, DEA secretary Ajay Seth said on Wednesday that food prices have been a problem area, and it is largely due to unusual rainfall but other than the food prices, inflation is not a challenge.