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to December 18. The fuel price index also rose on a rally in global crude prices, increasing the
likelihood of another rate hike by the Reserve Bank of India (RBI).
While the wholesale food price index rose 14.44% in the week from a year ago, fuel price index
climbed 11.63%, data released on Thursday showed.
Food inflation was at 12.13% in the week before and 21.29% in the year-ago period. Fuel inflation in
the previous week was at 10.74% and it was 5.06% in the same period last year.
The high food inflation was attributed largely to a surge in the prices of onions, which have risen
nearly 50% in the six weeks to December 18.
Prices of some other vegetables like tomatoes and potatoes have also firmed up in the period. The
overall index of vegetables has risen by 28% in this period.
Finance Minister Pranab Mukherjee acknowledged that the high food inflation was a matter of
concern.
"Earlier , we thought that it (the food inflation) is because of the base effect, but it is not merely the
base effect,” Mukherjee told reporters after the data was released. “There has been real increase in
the prices of certain food items."
"It is a seasonal phenomenon,” said M Govinda Rao, Director, National Institute of Public Finance and
Policy. “The main reason for food inflation is shortage of certain food commodities such as onions and
tomatoes. It is a temporary phase, which will be over in a couple of months.”
Chief economist with rating agency Crisil , D K Joshi, said food inflation has come as a shock, but
added that the price rise was temporary.
Economists say the increase in food and fuel inflation could stoke the headline inflation further.
Although , the wholesale price index had eased in November to 7.48% year-on-year , it still remains
far above the RBI’s target of 5.5%.
A surge in prices has also increased the likelihood of a hike in key policy rates when the RBI meets
for its next review on January 25. The central bank has raised interest rates six times since March.
"It is likely that the RBI would increase the key policy rates during the third quarter review in line with
its monetary policy stance of anchoring inflationary expectations," said Aditi Nayar, economist
with ICRA .