Food inflation falls to 9.55% for week ended Aug 27

[1]

Food inflation fell to a single-digit at 9.55 per cent for the week ended August 27 after breaching the double-digit mark in the previous week, with prices of all items, barring pulses and wheat, going up on an annual basis.

Food inflation, as measured on the basis of the Wholesale Price Index (WPI), stood at 10.05 per cent in the previous week. The rate of price rise of food items was 14.76 per cent in the corresponding week of 2010.

As per data released by the government on Thursday, prices of pulses fell by 1.56 per cent year-on-year, while wheat became cheaper by 1.04 per cent during the week ended August 27.

However, other food items became more expensive during the week under review.

Onions grew dearer by 42.03 per cent on an annual basis, while potato prices were up by 13.38 per cent during the week under review.

Fruits became 16.57 per cent more expensive and overall, prices of vegetables shot up by 22.42 per cent on an annual basis in the week ended August 27.

The prices of eggs, meat and fish were up 7.26 per cent, while milk and cereals became dearer by 9.12 per cent and 5.45 per cent, respectively.

The fall in food inflation could be attributed to a moderation in the rate of price rise of some of the items on a week-on-week basis, even though they continued to go up.

In the previous week ended July 30, the rate of price rise of items like onions, vegetables, milk and cereals was more on an annual basis in comparison to the week under review.

The decline could also be attributed to the high inflation rate of over 14 per cent in the corresponding year-ago period, a phenomenon dubbed the 'high base effect' in economic parlance.

Overall, inflation in primary articles was recorded at 13.34 per cent in the week ended August 27, up from 12.93 per cent in the previous week. Primary articles have a share of over 20 per cent in the WPI.

Inflation in non-food articles, which include fibres, oilseeds and minerals, stood at 19.88 per cent during the week under review, up from 17.19 per cent in the previous week.

Meanwhile, fuel and power inflation stood at 12.55 per cent for the week ended August 27, the same as in the previous week.

After a brief period of moderation, food inflation had breached the double-digit mark and stood at a five-month-high of 10.05 per cent in the week ended August 20.

Experts, however, are of the view that despite the latest fall, pressure on the price front continues and is expected to keep the government and the Reserve Bank on their toes.

Headline inflation, which also factors in manufactured items, fuels and non-food primary items, stood at 9.22 per cent in June.

The Reserve Bank has already hiked policy rates 11 times since March, 2010, to tame demand and curb inflation.

The RBI and the Prime Minister's Economic Advisory Council had projected headline inflation to remain high at around 9 per cent till October.

In its Economic Outlook for 2011-12 released last month, the PMEAC said that while pressure from food inflation has fallen in recent months, the rate of price rice still remains quite high, with the possibility of a further surge in coming months.