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Food inflation eases to 12.30 %

Special Correspondent
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Continuing its declining trend for the fourth straight week, food inflation further eased a tad to 12.30 per cent for the week ended October 30 from 12.85 per cent in the previous week even as onion prices ruled higher following crop damage owing to heavy rains in parts of Maharashtra.

With the WPI (Wholesale Price Index) based food inflation still sticky at its higher level despite the statistical advantage of a high base of 12.59 per cent during the like week last year,

Finance Minister Pranab Mukherjee conceded that the fall in prices had not been fast enough but hoped that the declining trend would continue.

“I hope this [declining] trend will continue...Therefore, the basic point which you can derive is that though the coming down is slow, but as it is on year-on-year basis... because this time last year also, base was reasonably high that is why it is coming like that,” Mr. Mukherjee said while explaining to the media the reason for the tardy southward movement in food inflation.

Supply constraints

The WPI data shows that while prices of most food articles such as like wheat, pulses and potatoes declined, onions turned costlier by nearly 10 per cent during the week on supply constraints following crop damage in the onion-growing regions of Maharashtra, especially Latur, owing to torrential rains.

The general expectation among economic analysts is that although food inflation will not immediately drop to single digit, it will do so eventually, at least by the end of this year.

However, food inflation will remain a major factor for what steps the Reserve Bank of India (RBI) chooses to take while reviewing its monetary policy next month.

The government, however, is looking forward to overall inflation easing to 6 per cent by the end of December. In that case, the apex bank may decide in favour of a status quo in its key policy rates, as indicated in its monetary review earlier this month.

Harping on the RBI's rider that will determine its action aimed at taming inflation, Prime Minister's Economic Advisory Council Chairman C. Rangarajan said: “If inflation as measured by [the] Wholesale Price Index shows a distinct downward trend in the coming month, then perhaps no further action [by the Reserve Bank of India] will be required.”

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