Food inflation eases to 18.2%

Food inflation eases to 18.2%
Business Standard, January 8, 2010, Page 6

BS Reporter / New Delhi

Food inflation eased slightly at 18.22 per cent for the week ended December 26 but there was little respite for the common man, as prices of pulses and cereals were still ruling high.

The food inflation rate, as measured by the Wholesale Price Index (WPI), was 19.85 per cent for the previous week. Food inflation had stood at 10 per cent during the corresponding period in 2008.

Inflation rates for most essential commodities continued to be in double digits. Cereals and pulses registered annual inflation rates of 13.91 per cent and 42.21 per cent, respectively. During the week, food prices fell by 1.01 per cent, primarily due to a week-on-week decline in the prices of pulses (0.24 per cent), vegetables (11.23 per cent) and potatoes (12.01 per cent).

“This is a very slight moderation and will be short-lived. It is primarily due to a decline in the prices of perishables. Shortages in rice and pulses will continue to be a problem. A lot depends on the rabi crop,” said Rupa Rege Nitsure, chief economist, Bank of Baroda.

With the wholesale food inflation staying high, analysts expect the Reserve Bank of India will increase the cash reserve ratio — the amount of funds banks have to park with it — by 25-50 basis points in its upcoming third quarter monetary review on January 29.

However, most maintain that policy rates like repo and reverse repo will remain untouched in the near term.

The annual inflation rate for primary articles, which include food and non-food articles, stood at 14.39 per cent for the week under consideration.

The fuel index rose by 0.4 per cent on higher prices of light diesel oil (5 per cent), naphtha (3 per cent) and furnace oil (2 per cent). The inflation rate for fuel products was 4.85 per cent during the week.