While the headline wholesale price inflation remains low (0.84 per cent for the week ended September 19, 2009) – it was even negative during June-August 2009 – CPI inflation has been persistently high for almost a year. Higher food prices in our case are partly a result of the structural demand-supply imbalances. At present, cyclical factors are also at play.
Monsoon in the current season, which ended on September 30, has been the weakest since 1972. Agricultural output is expected to suffer and this could keep upward pressure on food prices in the coming months. High food prices are, therefore, a mix of structural and cyclical factors.