Food inflation fell to single digit at 9.67 per cent for the first time this year bringing relief to the government, which has been braving concerted Opposition attack on rising food and fuel prices within and outside Parliament.
Falling for the second week in a row, the food inflation slipped by 2.80 percentage points for the week ended July 17 from 12.47 per cent in the previous week, driven mainly by falling prices of vegetables, especially potatoes and onions.
"It is a very welcome news. Inflation has moved pretty much on cues as I had expected. It feels good. However, it should not be over interpreted," Chief Economic Advisor Kaushik Basu said.
The food inflation came down to single digit for the first time since the government in November 2009 started giving separate figures for inflation of primary articles.
Opposition parties led by National Democratic Alliance (NDA) had organised an all India agitation on rising prices on July 5, which saw right wing BJP and Left parties coming together on an issue.
The issue of price rise rocked Parliament again leading to adjournment of the proceedings in both the Houses for the third consecutive day today. The Opposition parties want discussion on price rise under a rule that entails voting, which is not agreeable to the government.
Though the government can draw comfort from food inflation declining to single digit, the data released by the government shows that prices of pulses, milk and fruits rose by 21.23 per cent, 19.03 per cent and 12.14 per cent, respectively in the last one year.
High inflation promoted the Reserve Bank on July 27 to raise key policy rates up to 0.50 per cent the impact of which will be felt in the coming weeks.
The fall in inflation for the week ended July 17 was mainly on account of decline in potato and onion prices. Potatoes became cheaper by over 46 per cent and onions by over 10 per cent. Overall vegetable prices fell 14.77 per cent.
"The fall is basically due to the high base affect. Besides seasonal fall in food inflation is normal. And we can expect further fall due to monsoon progress and rise in farm productivity," said Jayati Ghosh, professor of economics at Jawaharlal Nehru University.
Yes Bank chief economist Shubhada Rao too opined that, "over the next few weeks we can expect some more easing of the food inflation... The progressive easing of the food index will also provide some comfort from the overall inflation".
Overall inflation, which includes prices of manufactured goods, has been in double digits for the past five months. It was 10.55 per cent in June.
Food inflation has remained above the 16 per cent level for most part of the year, before falling sharply to below 13 per cent since mid-June.
