Wholesale food inflation declined to a seven-week low of 13.07 per cent for the week ended January 29, primarily owing to a sharp decline in prices of vegetables during the week. The fall in prices is also due to last year’s high statistical base effect when food inflation stood at a 20-year high of 22.08 per cent. Food inflation, as measured by the Wholesale Price Index stood at 17.05 per cent in the week ended January 22.
Though prices of vegetables fell sharply during the week, those of protein-based high-value food items like eggs, meat, milk and other perishables, increased. Fuel inflation increased marginally to 11.61 per cent from 11.60 per cent in the previous week, due to base effect, since prices of all items within the category remained static during the week.
“Food inflation declined to 13.07 per cent, led by a sharp fall in vegetable prices, which are expected to ease further over the coming few weeks. However, prices of protein items increased on a week on week basis, highlighting the structural aspect of food inflation related to changing consumer preferences,” said Aditi Nayar, economist with ratings agency Icra Ltd. Analysts also said they expected overall inflation for January at 8.5 per cent, similar to the provisional estimate of 8.4 per cent for December 2010.
“Although inflation in primary articles dropped to a seven-week low, larger upside risks to inflation in the form of rising crude oil prices remains elevated. While food inflation has declined, rising inflation level in non-food articles raised another concern”, said Arun Singh, chief economist, Dun and Bradstreet. Analysts also fear persistently high non-food inflation will start translating into high manufacturing inflation.
