Food inflation back in single digit at 9.5%

Food inflation back in single digit at 9.5%

New Delhi: Food inflation came back to single digits at 9.5% for the week ended March 19 helped by cheaper pulses though vegetables and fruits remained expensive.

The inflation in the edible segment, measured on the basis of wholesale prices, had soared to 10.05% in mid-March after remaining in single digits for two weeks in a row.

The drop in food inflation in the week under review is also due to higher base in the corresponding period last year, when the rate of price rise was 20.18%.

For the week ended 19 March, prices of pulses declined by 4.40% year-on-year, the WPI data released today said.

However, vegetables became costlier by 5.52% year-on-year, with potato prices rising by 8.39% and onions by 6.23% during the week.

Besides, prices of fruits soared by 24.67% year-on-year while eggs, meat and fish became dearer by 15.34%.

Economists said a higher WPI rate in the same period last year has helped the food inflation come back to single digit this week.

“A favourable base effect is expected to aid a decline in food inflation (numbers) in the coming weeks," ICRA economist Aditi Nayar said adding it would be about 8.5% by March end.

While the RBI has hiked key policy rates eight times since March 2010 to tame inflation, economist and director with KASSA, Siddharth Shankar, said the government would have to take steps to control the rising food prices.

“Inflation is here to stay...More than central bank, it will be the governments who will need to take steps to counter inflation," Shankar said.

As per the government estimates, India annually losses fruits and vegetables worth one lakh crore for want of proper processing facilities.

Experts also said that despite decline in food inflation, which contributes about 14% in the WPI index, the headline inflation by end-March would exceed RBI’s projection of 8%.

“Recent trends in primary and fuel inflation suggest that overall WPI inflation for March 2011 would exceed the RBI’s forecast of 8%," Nayar added.

The overall inflation in February 2011 stood at 8.31%.

The data stated that milk became costlier by 5.79% on an annual basis.

While prices of cereals were up 3.96%, rice became dearer by 2.94% during the week. However, wheat prices remained unchanged year-on-year.

Annual inflation in non-food segment was up by 26.18%. Mineral prices were higher by 12.35% during the week under review, while petrol became dearer by 23.14%.