India's food and fuel price inflation quicken at the end of May, put his head pressure on wholesale price index, which may prompt further tapering of monetary policy in the Reserve Bank of India.
The food price index rose to 16.55 percent in the year to May 22 the administration data showed Thursday, higher than the previous week's annual reading of 16.23 percent after an add to in vegetable prices.
The fuel price index rose 14.14 percent, compare with an annual increase of 12.08 percent over the past week because of higher prices for electrical energy.
Although food prices have moderate after hitting a high of 20 per cent in December last year, they remain near 17 percent. However, the prospects for a normal monsoon this summer is expected to cool prices.
The four months per year rainfall, vital for the irrigation and agricultural production, hit the country's southern coast Monday as expected. Last year was the driest season in 37 years injured crops and drove food prices up.
Wholesale Prices, RBI were the most closely watched gauge of inflation at 9.59 percent in April after 10.6 percent in February, the maximum since October 2008.
Any moderation in food prices is expected to reduce inflation and provide help to the Congress-led government is facing flak over its handling of inflation.
Prime Minister Manmohan Singh, who expects inflation to ease to 6.5 percent in December, said Tuesday the price situation today was a big problem and will require a determined effort.
RBI Governor Duvvuri Subbarao said on Tuesday inflation remained higher than their level of comfort.
The bank has raised its prices twice, with a total of 50 basis points since mid-March to tame inflation and predictable to deliver a second rate hike of 25 basis points when it reviews its policy on July 27.
RBI has also not ruled out any off-cycle political action, but concern over Europe's debt crisis had dampened prospect that something will happen before the next listed policy review.
"RBI will continue to normalize rates. But there is little reason for RBI to be aggressive or unwilling to raise prices." said Indranil Pan, chief economist at Kotak Mahindra Bank in Mumbai.
"Adjustments in prices will be gradual, since there is much indecision."
A Reuter’s poll last month showed expectations for an increasing 100 basis points of tightening of policy rates by the end of March 2011.
Costly FUEL
But the rise in fuel prices may offset relief on food prices.
A ministerial panel gathering on 7 June to consider increasing government set petrol and diesel prices, as India seems to move towards a market strong-minded pricing regime.
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