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  3. Protein based items had led to an increase in food inflation: Finance Minister

Protein based items had led to an increase in food inflation: Finance Minister

08 Nov 2011 Evaluate
Commenting on the stubbornly high food inflation, Finance minister Pranab Mukherjee on November 7 said high demand for protein-based food articles had led to an increase in food inflation.  “There has been a recent spike in food inflation in past three weeks. The principal reason is high demand for vegetables, meat and egg,” Mukherjee said.

As per the data on weekly food inflation, measured by Wholesale Price Index (WPI), prices of vegetables increased by 29%, milk surged by 12% and egg, meat & fish prices increased by 13%. Although, India is one of the largest milk producers, but because of the increased demand, country is facing shortage of milk.   

“No country in the world can feed 120 crore-plus people. Therefore, in areas of cereals like wheat, rice, bajra and other grains, pulses, edible oil, sugar, milk, egg, meat, vegetables and fruits —there is no alternative than to produce, preserve, process and distribute,”  finance minister said.

Because of surge in prices of protein items, India’s food inflation for Week ended on 22 October surged to 12.21% from 11.43% in the last week. This was the third successive week when food inflation is in two digits.  “Food inflation is a matter of great concern for all of us,” Mukherjee said,

Analyst and economist headline inflation measured by WPI to be high because of the high food prices. During September, India’s food inflation stood at 9.72%. However, the Reserve Bank of India, expects inflation to moderate to 7% by the March end. In its mid-yearly monetary and credit policy review, the RBI hiked its key policy rates by 25 basis points. Since March 2010, the RBI has raised its key policy rates by 375 basis points.    

Experts have the view that rates cuts will start around mid 2012 as interest rates are well above neutral. However, any decision on rate cuts will be conditional to inflation which is hovering near by two digit mark.


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