Food inflation rises marginally to 11.49%

The swelling in food inflation, rising spree of which has emerged as the major economic problem confronting the government, has been spurred primarily by rising prices of essential food items like vegetables, milk, egg and meat.

The food inflation after persistently posting double digit percentile rise witnessed decline for two consecutive weeks ended January 29 and February 5. Food inflation hovered at alarming level of 21.82 per cent in the comparable period of the previous year.

If the rise in food inflation continues unabated in coming weeks, the overall inflation, which stands at 8.23 per cent in January this year, is likely to go up further.

Steps to combat prices

However, Prime Minister Economic Advisory Council—the highest economic think tank at the government level—has projected that headline inflation would come down to 7 per cent by end of this fiscal 2010-11. Prime Minister Manmohan Singh while reiterating his government’s commitment to curb inflation asserted in the Lok Sabha that by the end of this fiscal inflation would be controlled.  Analysis of data shows prices of eggs, meat and fish rose by 14.79 per cent in the week ended February 12 while milk and vegetable prices went up by about 17 per cent and 15.89 per cent respectively.

In recent months the food inflation has been witnessing sharp rise because of abnormal hike in prices of staple kitchen vegetable like onion.

The data show on an annual basis, onions became costlier by 6.55 per cent in the week under consideration, but on a week-on-week basis, they tumbled by 20.30 per cent.
The year-on-year increase in vegetable prices was 15.89 per cent while on a weekly basis vegetable price fell by nearly 11.6 per cent.

Fruits turned costlier by 13.13 per cent year over year, while milk prices increased by 16.99 per cent on an annual basis during the week under review.  Analysts apprehend that if the rising trend in food inflation continues in coming weeks the overall inflation would further rise thereby putting pressure on the Reserve Bank to further tighten monetary policy thereby making all sorts of borrowings including car, housing and personal loans more costlier.

Both RBI and PMEAC have pegged inflation level in the range of 4 and 5 per cent as tolerable.

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