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Food inflation eases in mid-June

Food inflation eases in mid-June
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First Published: Thu, Jul 01 2010. 11 58 AM IST
Updated: Thu, Jul 01 2010. 11 58 AM IST
New Delhi: India’s food price inflation eased to its lowest annual growth this year, dampened by a weakening base effect, while the fuel price rise was slightly lower than the previous week, government data on Thursday showed.
The food price index rose 12.92% in the year to 19 June, lower than the previous week’s annual rise of 16.90%.
The fuel price index climbed 12.90% compared with last week’s annual rise of 13.18%, data on Thursday showed.
High prices, particularly of food, have emerged as a policy headache for Prime Minister Manmohan Singh’s government in a country with hundreds of millions of poor.
“It (the slower rise) is because of a weakening base effect. We have been saying that food price inflation will come down from July because of the base effect,” said N R Bhanumurthy, economist at National Institute of Public Finance and Policy, a Delhi-based think tank.
The government is hoping that a normal monsoon will cool down food prices and will also bring down headline inflation that is in double-digits.
However, a shaky start to the rainy season is heightening doubts over the forecast of a normal monsoon this year. Monsoon rains were 16 percent below normal in June, the second-lowest since 1995, data from the India Meteorological Department (IMD) showed on Thursday.
The latest monsoon data comes days after the government decided to free up state-subsidised petrol prices and raised the prices of other fuels.
The decision to hike fuel prices has sparked protests from political allies and opposition parties and is also expected to push up wholesale price inflation, which stood at 10.16% in May, by 0.9 percentage point.
Chief statistician Pronab Sen last week said inflation was spreading, an assessment that was backed by a 13.91% annual rise in Consumer Price Index (CPI) in May. The index measures price pressures in the economy at the retail level.
The Reserve Bank of India (RBI) has forecast headline inflation to ease to 5.5% by March 2011. But RBI governor Duvvuri Subbarao last month said the bank would revisit that forecast at its 27 July review.
Pressure has been mounting on the RBI to raise rates at a faster pace, but central banker K C Chakrabarty on Monday said the probability of an off-cycle rate hike was “very low”.
The RBI is widely expected to increase interest rates at its 27 July policy review. It raised rates by 25 basis points each in March and in April.
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First Published: Thu, Jul 01 2010. 11 58 AM IST
More Topics: Economy | Inflation | Food prices | Fuel price | RBI |