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NEW DELHI: Food prices surged an annual 13.3 percent in mid-August even 
as the overall wholesale price index fell, and the impact of a poor monsoon on inflation and the economy could prompt further government relief steps.
The widely watched wholesale price index fell 0.95 percent in the 12 months to Aug 15, its 11th successive fall. That compared with a 1.53 percent decline in the prior week and a market forecast for a decline of 1.41 percent.
The food articles index surged 13.3 percent from a year earlier as drought has hit nearly half of India’s districts, eroding crop production and raising major headaches for policy makers.
“Food prices are rising sharply and this will bring the WPI into the positive zone within a month,” said D.K Joshi, principal economist at rating agency Crisil.
“It won’t influence the present easy monetary stance.”
A poor monsoon and a possible decline in farm output could lower overall growth in Asia’s third-largest economy in 2009/10 (April/March) by 1 or 2 percentage points, economists have said.
Officials have said mitigating the impact of the drought conditions is the government’s priority, although any extra spending would not raise market borrowing beyond the projected record of 4.51 trillion rupees ($92 billion) for 2009/10.
Separate data on Thursday showed infrastructure output grew 1.8 percent in July from a year earlier, slower than an upwardly revised 6.8 percent in June.
Last month, the central bank held policy rates steady, after having slashed its key lending rate by 425 basis points between October and April. It revised up its inflation forecast for the fiscal year ending March 2010 to 5 percent from 4 percent.
Crisil’s Joshi said rising food prices would push WPI inflation above the central bank’s forecast.
The economy grew 6.7 percent in 2008/09, slower than the 9 percent or more growth clocked in the previous three years, and the central bank has forecast 6 percent growth in 2009/10 with an upward bias.
($1=48.9 rupees)
-Reuters
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