Food inflation at 29-mth low of 7.33%

Food inflation fell to a 29-month low of 7.33 per cent for the week ended July 16 as protein-based items saw moderation in rate of price rise. However, policy makers and experts cautioned against inflationary pressures that forced RBI to go for aggressive measures.

The decline in food inflation, compared to 7.58 per cent in the previous week, was also attributed to high base effect of 18.56 per cent a year ago.

Inflation fell to its lowest since February 28, 2009, when it stood at 6.71 per cent. This could be credited to the fall in inflation in fruits and protein-based items like egg, meat & fish and milk.

However, inflation in vegetables has been on the rise, leaping to 10.55 per cent compared to 4.31 per cent for the week ended July 9.

This rising trend can be tracked from June 18 when vegetable inflation was at (-) 10.08 per cent.

Among vegetables, potato saw a jump in inflation to 10.55 per cent from 4.20 per cent.

This effect was not visible in the overall food inflation due to low weights of these items in the overall food index.

Fuel and power inflation remained steady at 12.12 per cent. However, Finance Minister Pranab Mukherjee cautioned against reading too much into fall in food inflation. “These weekly figures fluctuate mainly on the base (effect). Therefore, they do not show any definitive trend... there is still inflationary pressure (in the economy),” he said.

Siddharth Shankar, director in financial services firm KASSA, also did not seem impressed by the falling numbers. “The food inflation number falling is due to base effect but if we compare this week with previous week, on a sequential basis, it has gone up.”

Despite falling food inflation, experts said overall rate of price rise may not see any dampening effect as non-food items are witnessing price pressures. Overall food inflation stood at 9.44 per cent in June.

To tame high inflation, the RBI had created a stir in industry sentiment on Tuesday by increasing repo (short-term lending) rate by 50 basis points. In its monetary review, the apex bank had pointed to risks on the food inflation front “stemming from the monsoon performance, higher minimum support prices and inadequate supply response pertaining to protein-rich items”.