India's high food prices have started to ease and will dip further next month, the farm minister said, while the finance minister is still worried about inflation amid signs that the headline number may hit 10 percent by March. Despite a string of government efforts to ease concerns, rising prices are posing a big challenge for the Congress-led government, particularly high food prices, and they may prompt the central bank to raise interest rates even before April. The government last month ordered the sale of stocked grain and extended duty-free sugar imports by nine months. Farm Minister Sharad Pawar said prices would start coming down in the next seven to 10 days. But progress is slow, especially for millions of poor urban voters that helped re-elect the Congress party to power last year. Dealing with this pain at the grassroots could overshadow government efforts to cut spending and the fiscal gap in the Feb 26. budget. Food prices rose an annual 17.4 percent in January, easing slightly from a rise of 19.2 percent in December. But India's headline inflation accelerated to its fastest pace in 14 months in January, rising an annual 8.56 percent -- above the central bank's revised end-March inflation forecast of 8.5 percent. “That is a matter of concern no doubt and I am afraid that an 8.56-percent rise in WPI (wholesale price index) is disturbing,” Finance Minister Pranab Mukherjee said. “We have taken on the supply side adequate measures which will take some time to have the depressing impact on the rising prices of essential commodities.” Pawar, however, said food prices have started falling and will dip further next month. Pawar also said India's wheat harvest would exceed last year's record 80.6 million tonnes and the government will not restrain large sugar firms from buying sugar from the domestic market. Even as the government remains hopeful of a moderation in rising prices, analysts expect headline inflation could speed to double-digits by March on a rise in manufacturing prices. “We expect core inflationary pressures to rise further because input costs have surged much faster than output prices. We expect inflation to rise to double-digits by March,” Sonal Verma, economist at Nomura said in a note. On Tuesday, India's chief statistician Pronab Sen told Reuters that headline inflation could top 10 percent by the end of March. Street protests Rising food prices have sparked opposition-led street protests and could distract the government from pushing reforms. A government panel has advised eliminating price controls for gasoline and diesel and an income-linked rise in kerosene and cooking gas prices. The government is dithering. Freeing up fuel costs may boost broader inflation, and food prices. A relentless build-up in price pressure is also putting pressure on the Reserve Bank of India (RBI) to take sterner measures like raising rates ahead of its April policy review. The RBI is widely expected to raise borrowing rates at its April review after surprising markets with a bigger-than-expected rise in banks' cash reserve requirements in January. Pranab Mukherjee also said economic growth in the fiscal year 2010/11 (April-March) could top 8 percent, following a growth at around 7.5 percent in the current fiscal year ending March. The government officials have forecast the economic growth in the current year in the range of 7
