Inflation rises to 1.51%

Inflation rose fastest in six months to stand at 1.51 per cent, much in line with the RBI's warning that inflationary pressures are building up in the economy, prompting it to tighten money supply.

Inflation grew by 0.30 percentage points during the week ended October 17 from 1.21 per cent in the previous week, even as many food items became cheaper.

However, on yearly basis, food stuffs remained expensive, turning costlier by 12.85 per cent, with potato prices soaring by 97.73 per cent, onion 45.26 per cent, sugar 45.73 per cent and pulses 22.92 per cent.

Inflation rose even on high base effect as it stood at 10.82 per cent a year ago.

Analysts said from now on inflation will be on the rise and may touch 6.5 per cent as projected by the Reserve Bank. "RBI's projection of a 6.5 per cent inflation is realistic," Crisil Principal Economist D K Joshi said.

Many economists are, however, hopeful about food prices coming down as on weekly basis these have started declining.

Food prices declined 0.07 per cent on weekly basis as mainly vegetables and sea fish prices came down. However, some items like cereals and pulses may remain costly.

"Price of primary articles have begun to come off which could be a seasonal phenomenon. Prices of frozen food is likely to remain stable, although cost of cereals, pulses may remain elevated," Yes Bank chief Economist Shubhada Rao said.

To tame inflationary expectations, the RBI has raised the Statutory Liquidity Ratio (SLR), the amount banks are to keep in government securities, cash and gold, by one percentage point to 25 per cent.

The central bank has also discontinued the special liquidity window for banks to provide fund for mutual funds. It said there are clear signs of rising inflation stemming largely from the supply side, particularly from food prices.

Already inflation has risen at the rate of 5.95 per cent so far from the beginning of this fiscal. During the week ended October 17, prices of mutton, tea, maize, arhar, moong, condiments and spices rose by one per cent each.

Among manufactured goods, imported edible oil and gur turned expensive by four per cent each, rice bran oil by 3 per cent and oil cakes by  two per cent.

However, prices of butter and groundnut oil declined by two per cent each and ghee by one per cent. In the fuel category, bitumen prices moved up by 2 per cent.

For the week ended August 22, wholesale price inflation stood at 0.17 per cent as compared to minus 0.21 per cent, according to revised estimates.