Rise in Inflation Is Disturbing

Recent government data showed that the wholesale inflation rate accelerated to 8.56% in January, the fastest pace in 15 months. The reading outpaced a central bank forecast of 8.5% for the end of March, raising worries it could touch double-digit levels by that time and prompt an aggressive monetary policy tightening by the central bank to rein in prices.

Inflation has been driven mainly by food prices, which have risen sharply due to supply constraints after the country faced its worst drought in 37 years in 2009.
To boost supplies, the government has announced the sale of larger quantities of grains from federal stockpiles. It has also extended deadlines for tax-free imports of white sugar and sales of subsidized edible oil under its welfare programs, and has asked state-run agencies to step up imports of pulses. However, these measures have so far failed to cool off food prices.
Sugar prices in India have jumped more than 30% in the marketing year that began Oct. 1, 2009, as the world's largest consumer of the sweetener faces a deficit for the second consecutive year.