India Struggles to Contain Resurgent Food Price Inflation

Chandrasekhar Atreya
23 Dec, 2010
New York City

Mumbai stocks dropped in choppy trade after persistent high food price inflation. Handicrafts exports surge 19% in the first eight months to$1.2 billion. India lifted its infrastructure investment target to $1 trillion and private sector participation to 50%.

[R]5:00 PM Mumbai, 8:30 AM New York – Mumbai stocks dropped in choppy trade after persistent high food price inflation. Handicrafts exports surge 19% in the first eight months to$1.2 billion. India lifted its infrastructure investment target to $1 billion and private sector participation to 50%.[/R]

Mumbai stocks fluctuated in a narrow range and closed lower ahead of holiday season and persistent high inflation also dampened the investor sentiment.

The BSE Sensex fell 0.16% or 32.92 points to close at 19,982.88. The CNX Nifty on the National Stock Exchange dropped 4.4 points to close at 5,980.00.

The rupee shed 15 paisa to close at Rs 45.83 in Mumbai today.

India’s food inflation surged back into double digits at 12.13% in the week ended December 24 as prices of vegetables, especially onions, rose for the third week in a row.

The wholesale price index in India increased 1.8% to 187.9 from 184.6 for the previous week. For the year to the week inflation increased to 15.35% compared to 13.25% for the previous week.

High inflation is making people to hold on to cash rather than invest in banks, according to the latest data released by RBI. The data shows that cash and currency with the public grew by almost Rs 100,000 crore this year between April 1 and December 3, against about Rs 65,000 crore in the year ago period.

The currency in the total rose 13% when compared with the growth in deposits while the deposits increased 10%.

Union Finance Minister Pranab Mukherjee said in New Delhi on Wednesday he saw the private sector chipping in with $500 billion (about Rs 22.50 lakh crore) for development of the infrastructure sector during the 12th five-year plan.

“We are already envisaging doubling of infrastructure investment to around $1 trillion in the 12th plan, with half of it coming from the private sector,” he said while delivering a key note address at the India Public Private Partnership Conclave.

The Petroleum and Natural Gas Ministry denied today that delay in deciding on the $9.6 billion Cairn-Vedanta deal would impact the latest round of auction of oil and gas blocks under the New Exploration Licensing Policy.

Joint Secretary Vivek Kumar said the ministry had said several times that it had “no position” on the deal while speaking at the CII roundtable on the Overseas Energy Acquisitions in New Delhi.

Handicraft exports from India have recorded a healthy 18.7% growth in the firth eight months of 2010 compared to the same period of 2009, said Union Textile Minister Dayanidhi Maran in New Delhi on Wednesday.

Handicraft items worth a total of Rs 5,238 crore were exported between April and November this year compared to Rs 4,412 crore in the corresponding period last year. In dollar the exports increased 25%, he said while presenting the national awards for excellence in handicrafts exports.

Nokia Siemens Networks said on Wednesday it received an order from the private telecom operator Idea Cellular to deploy equipment and services to provide 3G services in four circles of Uttar Pradesh (East), Uttar Pradesh (West), Kerala and Haryana.

Fortis Global Healthcare Holdings said on Wednesday it plans to acquire 30% stake in Australia’s Dental Corporation for about A$100 million (or Rs 450 crore) subject to regulatory and shareholders’ approval.