Oct. 21: Is a resurgent rural India fueling high food inflation? High food prices may be the result of increased consumption by rural people as income levels rise there, planning commission deputy chairman Dr Montek Ahluwalia believes. “If rural income goes up, more people will be buying vegetables, then their prices would go up. Food inflation is not up because of grain prices, they are moderate. It is up because of milk, fruit and vegetables,” said Dr Ahluwalia.
Food inflation is in double digits for some time now, despite repeated claims from the government side that it will come down soon. The food inflation, which measures the pace at which food prices are rising, fell to 15.53 per cent for the week ending October 9 due to increase in supply of some vegetables, as per the data released on Thursday. It was at 16.37 per cent in the previous week.
Dr Ahluwalia said that he was happy that the inflation has come down during the week but added that it was still high. He said food inflation would come down to single digit level soon, but refused to specify exact time frame for it. “I expect that food inflation would come down to single digit level,” he added.
However, economists are expecting inflation to come down to single digit by the end of December due to high base. “While the food inflation number is on the decline and I expect it to decline further we must take this decline with a pinch of salt as the base effect is also playing its part in reducing this number,” said Mr Siddharth Shankar, director, KASSA.
However, economists believe that even if food inflation comes down, overall inflation will still stay high. “Inflation could continue to be a thorn in the side of policy makers. Wholesale price inflation, although dipping below 10 per cent in July, could rise again. While the approaching harvest will help ease supply-side bottlenecks that have thus far been the cause of inflation, the release of cash into the economy could fuel demand-side inflation, instead,” says Deloitte, a consulting firm.