India Food Prices Climb 19.95%, the Most in 11 Years
Monday, December 21, 2009
Dec. 17 (Bloomberg) — India’s wholesale food prices rose at the fastest pace in eleven years, making it more likely that the central bank will raise borrowing costs to curb inflation.
An index of food articles compiled by the commerce ministry increased 19.95 percent in the week ended Dec. 5 from a year earlier, following a 19.05 percent gain in the previous week. A measure of fuel and electricity prices rose 3.95 percent, the ministry said in a statement in New Delhi today.
Policy makers in Asia have started to exit monetary stimulus as the global economic recovery causes the focus to shift from reviving growth to fighting inflation. Australia and Vietnam have already begun raising interest rates as inflation accelerates across Asia, with China’s consumer prices rising for the first time in 10 months in November.
“When growth is subdued, inflation can be ignored,” said Sonal Varma, a Mumbai-based economist at Nomura Holdings Inc., Japan’s largest brokerage. “However, with both growth and inflation surprising on the upside, we believe that a policy action is imminent.”
India’s economy expanded 7.9 percent in the three months to Sept. 30 from a year earlier, the fastest pace in 1 1/2 years, giving policy makers room to shift their focus to soaring food inflation that threatens to undermine the popularity of Prime Minister Manmohan Singh. Singh got re-elected this year on promises to alleviate poverty in a nation where about 800 million people live on less than $2 a day.
Opposition lawmakers yesterday accused the government of being ineffective in tackling soaring food prices and disrupted parliament, forcing the speaker of the lower house to adjourn for the day.
A panel of Indian lawmakers said in a report presented to parliament today that the government “failed to intervene” in a timely manner to address this “burning issue.” The standing committee of finance demanded a probe into the surge in sugar prices and suggested developing a mechanism to provide food items directly to consumers to overcome hoarding.