Aided by base effect, food inflation dips to 7-week low

Food inflation eased to a seven-week low during the week ended June 25, aided by the base effect and a continuing slide in items such as vegetables and pulses.

Fuel inflation too edged down on an annual basis, even though the fuel index sharply surged by 4 per cent on a sequential basis, reflecting the revision in prices of diesel, LPG and kerosene announced on June 24.

According to data released by the Government on Thursday, the food inflation estimate, based on the annual Wholesale Price Index, rose 7.61 per cent during the latest reported week, down from the 7.78 per cent annual rise reported in the previous week.

During the corresponding period last year, food inflation was close to 20 per cent. The fuel index rose 12.67 per cent, down from the 12.98 per cent annual rise reported in the previous week. The cascading effects of last month's increase in diesel, kerosene and cooking gas prices are expected to nudge food prices up in the coming weeks, analysts said.

According to the data, the primary articles index rose 11.56 per cent during the latest reported week, down from the 11.84 per cent a week earlier. Primary articles have a share of over 20 per cent in the WPI basket.

On a disaggregated basis, pulses were down over 9 per cent year-on-year during the period under review. Vegetables also dipped by 8.74 per cent, with potatoes falling 2.13 per cent on an annual basis. However, other food items continued to exhibit increased price levels during the week.

Fruits surged 22.75 per cent, onions were up over 21 per cent year-on-year, the eggs, meat and fish product category shot up by 10.12 per cent and cereals by 4.26 per cent. Milk too was up 12.10 per cent on an annual basis.

“The recent increase in the price of diesel may result in a further rise in vegetable prices in the coming weeks. Nevertheless, at present the vegetable index remains lower than the levels witnessed in June 2010… Overall, inflation for June 2011 is expected to rise to around 9.7 per cent, which may prompt the Reserve Bank of India to increase the repo rate by a further 25 basis points in the upcoming review of monetary policy,” Ms Aditi Nayar, Economist, ICRA, said.

Inflation of non-food primary items was up 17.69 per cent, lower than the 17.91 per cent in the previous week.

Fibres were up over 38 per cent on an annual basis, while minerals surged by nearly 28 per cent. Among fuels, LPG surged by 14.58 per cent on an annual basis, up from the previous week's 11.31 per cent.

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