Food inflation slips to 9.42 pc; trend likely to continue

New Delhi, Mar 17: Declining prices of potato and pulses pulled down food inflation marginally to three-and-half month's low of 9.42 per cent on Mar 5 from 9.52 per cent in the previous week, a trend which the experts say is likely to continue in the coming weeks.

"Now the main pressure will be from non-food items like fuel. The moderation in price rise of food items is likely to persist," said Crisil chief economist DK Joshi.

However, despite the climb down, commodities like fruits, milk and protein-based items, continue being expensive. Further, experts tell that with easing food prices, it is the high fuel prices that concern the government.

Unrest in Middle East and North Africa region had pushed international crude prices to a 30-month high of USD 120 per barrel some two weeks back. They are at present trading at USD 100 a barrel.

RBI today raised its headline inflation forecast for the fiscal ending Mar 31, to 8 per cent from earlier estimates of 7 per cent and raised its key policy rates by 25 basis points each to check escalation in prices.

"Volatility in global crude oil prices due to the current unrest in North Africa and Middle East can have serious repercussions for the country. However, food items are now likely to remain at a stable level," said a senior economist from a leading private sector bank.

According to both him and Joshi, the inflation forecast of 8 per cent by Mar-end is achievable.

The latest inflation figure of 9.42 per cent for the week ended Mar 5, was helped by a 9 per cent climb down in potato prices and 3.05 percent in pulses on annual basis.

The government had earlier exuded confidence that the expected bumper crop of wheat and pulses will help stabilise the rise in food prices. However, for the week ended Mar 5, prices of wheat and pulses among others continued to rise.

Cereal prices were up by 3.88 per cent on year-on-year basis, while rice became dearer by 2.75 per cent. Price of wheat also rose marginally by 0.69 per cent on annual basis.

Not withstanding the drop in potato prices, vegetables on a whole have became dearer by 8.71 per cent. Onion was expensive by 6.65 per cent.

Fruit prices rose by 19.39 per cent year-on-year. Milk became dearer by 7.16 per cent, while prices of egg, meat and fish prices went up by 13.10 per cent.

Meanwhile, prices of non-food articles rose by 23.03 per cent year-on-year. While fuel and power became dearer by 12.79 per cent, petrol became costlier by 23.14 per cent.

The headline inflation in the country has remained above 8 per cent since Feb 2010. According to the latest data, the overall inflation in Feb this year was recorded at 8.31 per cent.

PTI