Increase in prices of essential food items like vegetables, fruits and cereals, pushed up inflation to five-month high of 6.01 per cent in May and the likelihood of sub-normal Monsoon and political tension in Iraq may further worsen the price situation.
Attributing rise in inflation partly to withholding of food stocks by traders, Finance Minister Arun Jaitley said the Centre is committed to ease supply side bottlenecks and has also asked states to take firm measures against hoarders to check speculation.
"The Government is seized of the matter and is committed to ease supply side constraints. The rise in prices of food articles can also be attributed to withholding of stocks on account of apprehension of a weak Monsoon," he said.
He was commenting on the Wholesale Price Index (WPI) data which showed that inflation jumped to five-month high of 6.01 per cent in May primarily on account of costlier food articles, fuel and power costs.
The Union Finance Minister said the State Governments should take effective steps to ensure that hoarding is discouraged. down," Jaitley said.
The rise in inflation has been mainly on account of 31.44 per cent increase in prices of potato, 19.40 per cent in fruits and 12.75 per cent in rice, according to the official data on Wholesale Price Index (WPI) based inflation.
The food inflation stood at 9.50 per cent last month, while the manufactured inflation was 3.55 per cent. Indicating that hard times are ahead, Barclays (India) Chief Economist Siddhartha Sanyal said, “The risks from a poor Monsoon and uncertainties around global oil prices due to geopolitical tensions in Iraq remain.”
Such high level of inflation was witnessed last in December when it was 6.4 per cent. The WPI inflation was 5.20 per cent in April and 4.58 per cent a year ago in May. The March inflation figures have been revised upwards to 6 per cent from 5.70 per cent.
Expressing concern over spurt in food inflation, industry chamber CII said the Government should implement APMC Act, develop advanced supply chains, rationalise subsidies, augment investment in agri-infrastructure and encourage FDI in retail.
Prime Minister Narendra Modi in his first address in the lok Sabha last week had said, “We have promised to control inflation. We are determined to achieve this target.” The Government is preparing contingency plans to deal with the impact of below-normal Monsoon on food prices. The IMD has cut its June-September Monsoon forecast to 93 per cent.