Food inflation declined for a consecutive week, but still remained high at 15.52 per cent for the week ended January 8, amid clear indication that the Reserve Bank of India (RBI) may tighten monetary stance in its policy review on January 25.
Food inflation fell from 16.91 per cent in the previous week, but remained significantly high despite a high base effect of 18.62 per cent last year.
This is all evident when one sees price variation annually. Onions, the main contributor to food inflation, were costlier by over 98 per cent on a yearly basis. Overall vegetable prices rose by over 65 per cent.
Protein-based items like meat, fish, eggs and milk turned expensive substantially. In fact, RBI has attributed the rise in food inflation to a higher intake of protein-based items due to rising incomes of Indians. However, the prices of pulses went down by 14.92 per cent.
However, food items in general turned cheaper 1.19 per cent. Most food prices moved in a narrow range during the week, except for onions which became expensive by over 14 per cent. Prices of cereals also rose marginally. Finance Minister Pranab Mukherjee gave a cautious reaction to the declining trend, saying the fall did not bring much consolation and the government would continue to take steps to control the rate of price rise.
Complementing the government steps, RBI will in all likelihood raise policy rates, even though there are doubts that monetary steps could do anything to tame food inflation. RBI had raised policy rates six times last year, before pressing a pause button in its previous review, because of shortage of cash in the system.
Economists believe that food inflation will come to single digits only by the middle of next month. “I expect a similar kind of decline in food inflation next week, By mid-February, it will be back in single digits,” said Aditi Nayar, economist with credit ratings agency ICRA.
