Normal rain forecast cools food inflation

Normal rain forecast cools food inflation

India’s food inflation slowed as finance minister Pranab Mukherjee said agriculture prices may cool further on prospects of sufficient rains this year.

An index measuring wholesale prices of agriculture products including lentils, rice and vegetables compiled by the commerce ministry rose 16.61% in the week ended 17 April from a year earlier. It gained 17.65% the previous week, according to a statement in New Delhi on Thursday.

Mukherjee on Wednesday vowed to almost halve the benchmark inflation rate to 5.5% by 31 March on optimism of increased food output. The weather office said last week the June-September monsoon rains, the main source of irrigation in India, will be normal after the showers last year were the weakest since 1972.

A favourable monsoon outlook augurs well for calming any inflation fears arising out of food, said Shubhada Rao, chief economist at Yes Bank Ltd in Mumbai. She said food inflation may slow to between 5% and 6% by July.

The Bombay Stock Exchange’s Sensex gained 0.7% to close at 17,503.47 points, while the yield on the 10-year government bond dropped 0.01 percentage point to 8.08%.

Rainfall will be 98% of the 50-year average in this year’s monsoon season, according to the India Meteorological Department. Last year’s scanty rains caused a drop in the production of rice, wheat and sugar, keeping the food-price inflation at above 15% since November.