Food inflation will be the key macro driver in 2010

Overview

Food price inflation exceeding 19 per cent year on year has led market participants to conclude that the Reserve Bank of India will increase interest rates earlier and more aggressively than anticipated. The price increases are due not only to supply issues like the weak monsoon but to deeper structural factors including rising incomes and demand growth in a fast-expanding economy. We believe the stubborn rise in food prices will force the government to take more initiatives than just...