Food inflation is hurting less, but non-food keeps its sting

New Delhi: Food inflation fell to 9.03 percent for the week ended 6 August, even as the price of all items barring pulses rose on an annual basis.

Food inflation, as measured by the Wholesale Price Index (WPI), stood at 9.90 percent in the previous week. The rate of price rise of food items was 14.51 percent in the first week of August 2010. As per data released by the government on Thursday, price of pulses became cheaper by 5.63 percent year-on-year during the week under review. However, all other items continued to remain expensive.

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Onions were 37.62 percent more expensive on an annual basis during the week ended August 6, while prices of fruits went up by 26.46 percent. Eggs, meat and fish became dearer by 9.93 percent and the price of milk was up 9.76 per cent year-on-year. Cereals and vegetables were up by 6.23 per cent and 2.59 percent, respectively, while potato prices climbed by 7.22 percent.

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The fall in food inflation numbers could be attributed to a moderation in the rate of price rise of some of the items on a week-on-week basis, even though they continued to grow. In the previous week ended July 30, the rate of price rise of items like vegetables, potatoes, milk and egg, meat and fish was more on an annual basis in comparison to the week under review.

The decline could also be attributed to the high inflation figure of over 14 percent for the corresponding year-ago period, a phenomenon dubbed the ‘high base effect’ in economic parlance. Overall, primary articles recorded 11.64 percent inflation for the week ended August 6, down from 12.22 percent in the previous week. Primary articles have a share of over 20 percent in the WPI.

However, inflation in non-food articles, which include fibres, oil seeds and minerals, went up to 16.07 percent from 15.05 percent in the previous week. Meanwhile, fuel and power inflation stood at 13.13 percent for the week ended August 6, up from 12.19 percent in the week ended 30 July.

Food inflation was in double digits for most of 2010, but started to moderate from March this year. It fell to 7.33 percent in mid-July, before again rising to touch a four-and-a-half month high of 9.90 percent in end-July. Headline inflation stood at 9.22 percent in June. The RBI has already hiked interest rates 11 times since March, 2010, to tame demand and curb inflation.

The Reserve Bank and the Prime Minister’s Economic Advisory Council had projected headline inflation to remain high at around 9 per cent till October. In its Economic Outlook for 2011-12 released earlier this month, the PMEAC said that while pressure from food inflation has fallen in recent months, the rate of price rice still remains quite high, with the possibility of a further surge in

coming months.

In his Independence Day address to the nation, Prime Minister Manmohan Singh said that sometimes the reasons for price rise lay outside the country and added that the government’s efforts to tame inflation have not met with lasting success. “The prices of petroleum products, food grains and edible oil have risen steeply in international markets in recent times. Since we import these products in large quantities, any rise in their prices adds to inflationary pressure in our country,” Singh said.

PTI