Food inflation declines; brings no consolation to govt, people

Food inflation fell by 1.39 per cent from 16.91 per cent in the previous week though the numbers do not factor in the recent hike in petrol prices which will get reflected subsequently. "These are weekly fluctuation and naturally we shall have to watch the situation. Some of the vegetable prices are still high. The fact of the matter is from 16.91 per cent it has come down to 15.52 per cent..Though it is not much consolation but declining trend is there," Finance Minister Pranab Mukherjee said after the release of the weekly data.

Spiralling prices of vegetables and onions spiked food inflation as it remained in double digit throughout December. To control the price rise, the Centre asked state governments to remove supply side bottlenecks. Vegetable prices, however, continued to remain firm going up by 65.39 per cent over the same period last year. Onion prices doubled during the year.

While fruits became expensive by 15.91 per cent, prices of milk rose by 13.27 per cent and egg, meat and fish by 12.94 per cent. Prices of pulses, however, declined by 14.92 per cent, followed by wheat (6.11 per cent), and potato (2.91 per cent) on yearly basis.

Meanwhile, in the non-food category, the prices of fibres and minerals have climbed up by 46.77 per cent and 16.70 per cent respectively over the year-ago period. "We shall have to watch the situation. All necessary effective steps are being taken including improving of supply management," Mukherjee said. Analysts said food inflation is now on a declining trajectory and felt it would come down to single digit by mid-February.

"I expect similar kind of a decline in food inflation next week. By mid-February it will be back in single digits," ICRA Economist Aditi Nayar said. Analysts also expect the Reserve Bank to undertake a 25 basis points rate hike during the January 25 policy review meeting. Yesterday at a meeting with the state finance ministers, Mukherjee had asked them to remove local levies like octroi and mandi tax to bridge the gap between farmgate and retail prices.

The states, however, asked the centre to reduce duties on crude oil and petroleum products to tame prices.