India’s annual food price inflation rises to 17.40 per cent

India's annual food price inflation rose to 17.40 per cent in the 12 months to 16 January, which was higher than an annual rise of 16.81 per cent during the previous week, according to data released today. The index stood 0.4 per cent higher from a week earlier.

The food price index was up for the first time in four weeks, according to the data, leading comentators to speculte that the Reserve Bank of India  would be compelled to tighten money supply  at its quarterly review meting tomorrow to keep rising prices from impacting the broader economy.
It is being speculated that the RBI may hike cash reserve ratio by 50 basis points.

According to analysts, even as food supply is expected to normalise in the coming months, higher energy costs and strong consumer demand would ensure that headline inflation would inch towards 9 per cent by March 2010.

The fuel index was at an annual 5.70 per cent which was lower than the 6.34 per cent annual rise registered in the previous week.

Headline inflation is expected to be high on rising food prices following a bad harvest of summer-sown crops, according to some analysts; the wholesale price index may touch double digits by March from the 7.3 per cent figure for November.

The debt markets have already factored in a 25-30 basis points increase in the CRR, with some dealers also hedging in anticipation of a 25-basis point rise in policy rates on Friday.