New Delhi: India’s annual food inflation eased for the fifth consecutive week in early November, probably due to new crop arrivals in the market, lending support to expectations that the Reserve Bank of India (RBI) would hold rates steady in the near term.
The food price index in the year to 6 November rose 10.30%, compared with 12.30% in the previous week, as prices of rice, milk, vegetables and pulses eased, government data on Thursday showed.
The fuel price index in early November climbed 10.57% compared with the prior week’s 10.67% reading.
“The latest food inflation numbers give a short-term relief confirming to the expectation that the RBI may pause on rate hike for the next three months, though there is an upside risk on many commodities,” said Jyotinder Kaur, an economist at HDFC Bank.
Analysts expect food inflation to further ease with the arrival of new crops in markets this month, apart from the impact of previous monetary actions that work with a time lag.
“We expect headline inflation to come down to 5.5% to 6% by March end,” said Kaur.
The RBI has so far raised its key lending and borrowing rates by 150 and 200 basis points respectively since mid-March to anchor inflationary expectations.
Food items have a weightage of just over 14% in the wholesale price index, the widely watched inflation gauge in India, and has contributed to high headline inflation.
Annual headline inflation in October was 8.58%, its lowest in 10 months, easing slightly from 8.62% in September.
Finance minister Pranab Mukherjee said on Monday inflationary pressures were not merely coming from demand-side, but also from supply-side, adding he would not prejudge whether a further rate hike from the central bank was needed.
“International food prices are going up,” Mukherjee said.
China, where consumer price inflation sped to 25-month high in October mainly led by double-digit food inflation, announced on Wednesday that it would take forceful measures to stabilize consumer prices.
Prime Minister Manmohan Singh’s government, which is under fire over an alleged corruption scandal involving granting telecom licences -- one of India’s biggest -- is under political pressure to rein in rising food prices.