Data released by the commerce and industry ministry on Thursday showed the food price index rose 11.49% in the year till February 12, up from the previous week's 11.05%. Food inflation had shown a moderating trend in the past three weeks after spiralling to 18.32% in late December.
High food prices have emerged as a major policy headache for the UPA government and led to street protests. It has also hit investor sentiment.
Speaking in Parliament, the PM said inflation had become a problem in the last 18 months and there were reasons beyond the government's control which had contributed to the price spike.
"The government policy is to ensure that we control inflation but in a manner by which we do not hurt the growth of employment opportunities. And I respectfully submit to this august House that if we have a ham-handed approach, we could have killed the growth process which is the only source of providing jobs for our youth," Singh said.
He reiterated that overall inflation will come down to about 7% by the end of the fiscal year in March. RBI also expects it to be around 7% by end-March.
But economists say it would be tough to achieve the estimate against the backdrop of rising commodity and oil prices globally. Headline inflation, as measured by the wholesale price index, stood at 8.23% in January. The RBI has raised interest rates seven times since March 2010 to calm prices.
"Food inflation has also been a cause of concern. But recently, the situation has improved and I expect the situation to improve. But in the long run, in a country like India where agriculture prices are the kingpin of the price structure, the only way we can control inflation is through increased production and increased productivity of agriculture," Singh said.
Economists expect vegetable prices to moderate in the weeks ahead but milk and fruit prices are likely to rule high.
"The decline in the food price index in week-on-week terms was led largely by a substantial decline in vegetable prices, which may display some further correction over the coming weeks. However, prices of fruits and milk rose in week-on-week terms; the latter is expected to remain elevated in the near term as it partly reflects rising costs of inputs," said Aditi Nayar, economist at ratings agency ICRA.
The index for food articles group declined by 0.3% to 182.4 from 182.9 for the previous week due to lower prices of fruits and vegetables (5%), urad, fish-marine and condiments and spices (2% each) and bajra, moong and maize (1% each). Prices of milk (5%), jowar and mutton (2% each) and barley and ragi (1% each) moved up.
The index for non-food articles group rose by 3.2% to 187.1 from 181.3 for the previous week due to higher prices of raw cotton (12%), castor seed (8%), copra (5%), gaur seed (4%), raw rubber (3%), coir fibre and mesta (2% each) and soyabean and sunflower (1% each). Prices of raw silk and cotton seed (1% each) declined.
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