With the arrival of rabi crops in the markets and expectations of a normal monsoon, food inflation eased to 16.61 per cent for the week ended April 17 from 17.65 per cent in the previous week, raising hopes of some relief for the common man from the raging price spiral in the months ahead.

However, even as food inflation softened by over one percentage point, ostensibly owing to a cool-down in speculative activities on IMD (Indian Meteorological Department) reports of a normal monsoon this year, economic analysts apprehend that the pressure on prices might hold sway till June as a result of the inflationary spread to manufactured goods.

Clearly, much would depend on the IMD's initial forecast coming true as the projections by the government and the Reserve Bank of India (RBI) on overall growth and headline inflation for the current fiscal are based on a normal monsoon and further moderation in prices of food articles.

“The outlook is further brightened by the fact that a normal monsoon is predicted this year...Indications of softening of food inflation are clearly visible...It is expected that this decline will continue in the coming months uninterruptedly,” Finance Minister Pranab Mukherjee said in the Lok Sabha on Wednesday while initiating the discussion on the Finance Bill.

During the week, snapping the rising food inflation was lower prices of masur, jowar, fruits and vegetables which eased by two per cent and wheat by one per cent even as other edibles such as moong and urad among pulses and fish (inland) turned dearer.

On a year-on-year basis also, potato prices slumped by 28 per cent owing to a glut in various parts of the country while onions also turned cheaper by 10 per cent. On the contrary, the price of pulses ruled higher by about 30 per cent, milk by 22 per cent and fruits by about 10 per cent as compared to the previous year.

Even as food prices have begun to soften, the government's concern is to contain the overall inflation by checking its spread to manufactured items and other non-food segments. The WPI-based headline inflation in March was 9.9 per cent, way above RBI's fiscal year-end projection of 8.5 per cent. For the current fiscal, the apex bank has estimated overall inflation to come down to 5.5 per cent by March 2011.

Keywords: food inflation

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