New Delhi: Food inflation fell for the second straight week to a nine-week low of 11.05% as pulses, wheat and potato prices declined. The index fell by 2.02 percentage points during the week ended 5 February from 13.07% in the week ended 29 January.
On an annual basis, prices of potatoes declined by 13.63%, while pulses became 5.88% cheaper and wheat 2.54% less expensive, data released by the government showed.
Further, fruit and milk prices rose by 12.21% and 11.66%, respectively, while egg, meat and fish became 15.14% dearer on an annual basis.
At 11.05% during the week ended 5 February, food inflation was at its lowest level since 4 December 2010, when it stood at 9.46%.
The Indian food inflation is among the highest in Asia despite good harvests.
Overall headline inflation remained stubbornly high at more than 8% in January despite seven rate hikes by the Reserve Bank of India since March, with more tightening expected at the bank’s mid-quarter policy review next month.
“The data indicates that February WPI inflation is likely to fall further. This would mean less urgency for the RBI to accelerate the tightening cycle,” said Dariusz Kowalczyk, senior economist and strategist at Credit Agricole CIB in Hong Kong. Markets were little moved by the data, although the rupee extended gains to 45.36 per dollar from 45.40 earlier.
Finance minister Pranab Mukherjee is expected to announce measures at the 28 February budget to boost productivity of milk, fruit and vegetables, while holding off on a pending reform to deregulate diesel prices, which would likely fuel inflation.
“I expect by the end of March the food inflation could come down to around 8 percent due to arrival of foodgrains in some pockets and cooling of the speculation component in the commodity markets,” said N.R. Bhanumurthy, an economist at the National Institute of Public Finance and Policy, a Delhi-based think-tank.
Food prices have risen around 14% since March 2010 and the Reserve Bank of India, which is expected to raise rates by another 25 basis points next month, wants the government to pursue fiscal consolidation in the budget to rein in inflation.
Wholesale food prices jumped 15.7% in January compared with 13.6% in December, fuelling fears that food inflation is leading to sustained price rises in other sectors of the $1.3 trillion economy.
The primary articles index was up 14.59% easing from an annual rise of 17.05% a week earlier.
Global food prices are soaring, prompting a stark warning by the World Bank chief on Tuesday that prices had reached “dangerous levels”.
Prime Minister Manmohan Singh said on Wednesday headline inflation could come down to no more than 7% by March-end.
“Oil prices are rising, the food prices are rising, commodity prices are rising. We have to deal with inflation despite an adverse international environment,” he said.
World Bank data showed that high prices of food, mainly wheat, maize, sugars and edible oils, have pushed 44 million more people in developing countries into extreme poverty since June 2010.
The Group of 20 leading economies, whose finance chiefs meet on Friday and Saturday in Paris, has promised to take action on rising food prices.