Moderation in the prices of pulses, wheat and vegetables
In what the government on Thursday sought to describe as “a declining trend”, food inflation eased further to its 18-month low at 7.47 per cent for the week ended May 7 from 7.70 per cent in the previous week following a moderation in the prices of pulses, wheat and vegetables.
Considering that food inflation, as measured by the wholesale price index (WPI), around the like week last year was at a high of over 22 per cent, the government may have reason to derive some satisfaction. Economic analysts, however, warned against any complacency, especially as the price spiral in non-food items continues to rule at higher levels to provide no comfort to the Reserve Bank of India (RBI) to ease on its hawkish policy stance.
Commenting on the WPI data, Finance Minister Pranab Mukherjee said: “Both on food inflation and overall wholesale price index (WPI), there is a declining trend”. Pointing out that inflation had come down in all three segments — primary articles, food and non-food items — he was, however, quick to add: “I do not give much credibility to weekly fluctuations or monthly fluctuations. We shall have to take an overall view”.
For a major part of 2010, food inflation had remained in double digits and signs of moderation were visible only from March this year. In view of this statistical effect, prices of pulses eased by 8.87 per cent during the week on a year-on-year basis. Likewise, vegetables and wheat also turned cheaper by 3.61 per cent and 0.06 per cent, respectively.
However, as pointed out by the RBI in its annual monetary policy review, it is the core (non-food) inflation that remains a matter of concern and which is why overall inflation is projected to remain at near nine per cent during the first half of the fiscal year before easing to around six per cent.
Already, overall inflation during April is provisionally estimated at 8.66 per cent, down from over 9.04 per cent in March even as a hike in the prices of diesel and cooking gas (LPG) is on the cards. Pointing to this scenario, Kassa Director Siddharth Shankar said: “While the food inflation might have gone down a bit, but it still remains very high. It is only a matter of few weeks that would see the numbers go up sharply. The increase in fuel prices coupled with base effect could result in higher numbers in the coming weeks”.
Echoing similar views, Crisil's chief economist D. K. Joshi noted that the RBI was likely to hike its policy rates by another 25 basis points during its next review in mid-June.During the week, inflation in overall primary articles stood pegged at 10.94 per cent, down from 11.96 per cent in the previous week. This is despite the fact that other food items continued to cost more.