Expect more pain from prices, food inflation at 8.04 percent

If you think prices are losing their power to sting, then you are in for some news that might give you a jolt. According to data released by the government on Thursday, food inflation is now up at 8.04 percent for the week ended July 23. The culprits are onion, fruits and milk, which in all probability may make things more difficult, going forward.

[caption id=“attachment_54056” align=“alignleft” width=“380” caption=“The Prime Minister’s Economic Advisory Council projected headline inflation to remain high at around 9 percent till October. Pawan Kumar/Reuters”]  [/caption]

At one point, mid-July to be precise, there was an unmistakable sense of optimism in the air. Inflation was at a 20-month low, which gave the impression that the government’s firefight is working and paying off. But the reprieve looks to be short-lived.

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Food inflation, measured by the Wholesale Price Index (WPI), was 7.33 percent in the previous week, the lowest since November 2009. The rate of price rise of food items was 16.27 percent in the corresponding week of July 2010. As per the official data, onion became dearer by 26.36 percent year-on-year and fruits were expensive by 15.97 percent during the week under review.

Milk prices went up by 10.26 percent while vegetables were expensive by 10.20 percent on an annual basis. Besides, cereal prices were up by 5.13 percent, potato by 7.85 per cent, and egg, meat and fish by 6.66 percent. However, pulses became cheaper by over 7 percent on an annual basis.

The latest numbers also mark a resurgence of food inflation after a two-week long declining trend when the rate of price rise had fallen below the 8 percent mark. Overall, primary articles recorded inflation of 10.99 percent for the week ended July 23, up from 10.49 percent in the previous week. Primary articles have a share of over 20 percent in the WPI.

However, inflation of non-food articles which include fibres, oil seeds and minerals, fell to 15.60 percent from 16.05 percent in the previous week. Meanwhile, fuel and power inflation stood at 12.12 percent, the same as in the previous week.

Headline inflation stood at 9.44 percent in June. The RBI has already hiked interest rates 11 times since March, 2010, to tame demand and curb inflation. In its Economic Outlook for 2011-12 released earlier this week, the Prime Minister’s Economic Advisory Council projected headline inflation to remain high at around 9 percent till October.

The rate of price rise will ease from November, declining to around 6.5 percent by March 2012, it said. The report also said that while pressure from food inflation has fallen in recent months, the rate of price rice still remained quite high with the possibility of further surge in the coming months.

(With inputs from PTI)