Food inflation slides to 12.30%; FM says decline is slow

The slide enthused Finance Minister Pranab Mukherjee, who said he hoped that the declining trend will continue. He, however, admitted that prices are not falling fast enough.

Inflation was 12.59 per cent this time last year. Despite such a high base, food inflation fell to just 12.30 per cent for the week ended October 30. It was 12.85 per cent in the previous week.

"I hope this (declining food inflation) trend will continue... Therefore, the basic point which you can derive is that though the coming down is slow, but as it is on year-on-year basis... because this time last year also base was reasonably high that is why it is coming like that," Mukherjee told reporters in Parliament House premises.

While most food items like wheat, pulses and potatoes turned cheaper, onions became costlier by about 10 per cent within a week.

Economists attributed the rise in onion prices to crop damage in parts of Maharashtra, especially Latur, due to torrential rains.

"It has rained heavily in Maharashtra. That had an impact on onion crop," said Axis Bank chief economist Saugata Bhattacharya.

He said food inflation will not immediately decline to single digit, though it will do so eventually.

While declining to predict what RBI will do in its policy next month, Bhattacharya said food inflation will be a factor in any monetary action.

Declining food inflation will also have an impact on the larger wholesale price numbers for October, data for which will be released shortly.

The Government expects overall inflation to fall to six per cent by this year-end. If this happens, RBI may pause its rate hike measures, indications of which were given by the central bank in its monetary review earlier this month.

At an event by consultant Skoch, Prime Minister's Advisory Council Chairman C Rangarajan said, "...If inflation as measured by whole sale price index shows the distinct downward trend in the coming month, then perhaps no further action will be required."
Earlier this month, RBI raised its short-term rates for the sixth time to tame inflation saying prices of protein based food items are still high.

However, Rangarajan said food inflation could be tamed in medium term through improved production.

Fuel inflation stayed intact at 10.67 per cent, despite rise in petrol prices by 0.35 per cent during the week.