India Food Inflation Quickens Even as Farmers Expand Crop Area

By Tushar Dhara
(c) 2010 Bloomberg News
Thursday, July 15, 2010; 12:00 AM

An index measuring wholesale prices of farm products compiled by the commerce ministry rose 12.81 percent in the week to July 3 from a year earlier, according to a statement released in New Delhi today. It gained 12.63 percent the previous week.

Indian farmers planted more rice, oilseeds and sugar cane as the June-September monsoon rains covered the country nine days ahead of normal, the farm ministry said this month. Last year's rains were the weakest since 1972, stoking food-price inflation to 21.05 percent in November.

"Now that the monsoon rains are good this year, food inflation will moderate," N.R. Bhanumurthy, an economist at the New Delhi-based National Institute of Public Finance and Policy, said before the announcement.

India's benchmark wholesale-price inflation jumped 10.55 percent in June from a year earlier on higher consumer demand for manufactured goods and services, increasing pressure on the central bank to raise interest rates.

Food costs contributed only 28 percent to the June inflation reading compared with 68 percent in January.

The Reserve Bank of India, which has increased rates three times since mid-March by a quarter-point each, is scheduled to announce its next monetary policy decision on July 27.

© 2010