Indian sugar mills association

Food inflation falls to 6.6%

Date:	09 Dec 2011

Source:	The Financial Express

Reporter:	FE Bureau

News ID:	756

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New Delhi: Annual food inflation dropped to the lowest level since August 2008 to 6.6% for the week ended November 26 from 8% reported in the previous week, thanks to the decline in prices of onion and potato by 39.26% and 15.75%, respectively.

This is fifth straight weekly fall in food inflation measured on the basis of wholesale price index. Week-on-week, food prices fell 1%. The rather steep fall in food inflation has given more credence to the view that the RBI is unlikely to hike rates at its next policy review on December 16.

However, protein-based items continue to become expensive on an annual basis, the government data showed. Prices of wheat fell by 4.7%.

Analyst said sharp drop in food inflation graphs would help the Reserve Bank which is scheduled to conduct its next mid-quarterly credit policy review on December 16. Expectation of bumper kharif crop and record production last year have led to fall in prices of onion and potato in recent weeks. In cumulative terms, for the first time in recent months, vegetables became cheaper by 1.25%. Double digit rise in vegetables prices during last three months have kept the food inflation graph at higher level.

“The rate of food inflation is expected to moderate further in December 2011, particularly on account of the base effect,”Aditi Nayar, Economist, ICRA said. Food inflation was close to 9% in the same period last year, which indicates the high base. Pulses prices rose by 13% during the week under review, while milk became dearer by 11.02% and eggs, meat and fish grew by 10.04%. Fruits also became 10.72% more costlier on annual basis, while cereal prices were up by 1.68%.

“Off season demand for the vegetables, huge post harvest losses and inefficient storage mechanism for perishable commodities have contributed to rise in prices of vegetables, fruits and protein rich items which would keep food inflation at the higher level in the longer term,” P K Joshi, Senior Programme Coordinator, International Food Policy Research Institute (IFFRI), told FE.Meanwhile while speaking in Lok Sabha on price rise, Leader of Opposition Sushma Swaraj said , “In spite of taking effective measures to contain prices, the UPA government is giving technical reasons to justify the rocketing inflation.”

“It is highly unfair to say that increased consumption has led to price rise. The price rise is hitting the common man and the government`s has failed to understand this time and again,` she said. Countering oppositions` view, Congress MP PC Chako said, “spiraling inflation has slowly taken into grips the global economy and we are not isolated to it. The government has taken several measures, which includes imposing a ban on sugar and onion exports, to increase production and productivity. This is the reason why inflation has come down significantly in the recent months.”

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