Food inflation falls to four-month low of 9.18 pc

New Delhi: Food inflation fell to a four-month low of 9.18 per cent for the week ended March 26, prompting experts to suggest that record foodgrain production will keep the numbers stable in the coming months.

Food inflation fell from 9.50 per cent in the previous week and 21.15 per cent a year ago. The rate of price rise during the week ended March 26 was the lowest since the week ending November 27, 2010, when it was recorded at 8.69 per cent.

Although good crop production will keep food inflation low, experts fear that spiralling prices of crude oil in the international market could cast a shadow on the overall price situation.

The prices of pulses declined by 5.39 per cent during the reporting week, while other food items like rice, wheat and milk recorded modest increases.

Items like fruits and vegetables, however, continued to remain dear.

"With a record output projected for this year, we believe food inflation will remain moderate in the next few months," Crisil Chief Economist D K Joshi said.

The government had yesterday said that India`s foodgrains production is estimated at a record 235.88 million tonnes in the 2010-11 crop year, ending June, on the back of the highest-ever output of wheat and pulses.

"While prices of vegetables and fruits would continue to display some volatility, reflecting their perishable nature, prices of cereals and pulses may show a mild decline in the coming weeks. Overall, a favourable base effect is expected to aid a decline in food inflation in the coming weeks," ICRA Economist Aditi Nayar said.

Food inflation was in double digits for most of the last fiscal. However, it has shown signs of slight moderation since the last week of February and this is the second consecutive week when it was a single-digit figure.

The government had earlier said that rising food prices were one of the major reasons for overall inflation remaining high. Headline inflation was 8.31 per cent in February.

The Reserve Bank had last month revised its inflation projection for March-end upward to 8 per cent from the earlier 7 per cent.

Experts, however, said that higher prices of other commodities, primarily crude oil, may continue to cast a shadow on the overall inflation situation.

"It is a cause of concern that the overall inflation situation remains largely sluggish. Besides food inflation, which continues to gradually soften and hold below 10 per cent, inflation on primary articles and fuel and power have not moderated," Deloitte, Haskin & Sells director Anis Chakravarty said.

Concurring with the view, Joshi said that current high crude prices may spoil the expectation of lower food prices curbing inflationary pressure.

"Overall inflation is likely to remain higher than the comfort level of policy-makers. The global crude prices have to be carefully watched," Joshi said.

Ongoing political turmoil in Libya, close on the heels of similar unrest in Egypt, Tunisia and Bahrain, has pushed international crude prices to over USD 100 per barrel.

While pulses reported a decline during the week under review, the trend was the opposite for other items.

Fruits became dearer by 25.40 per cent year-on-year, while eggs, meat and fish became 12.80 per cent more expensive during the week under review. Milk was also up by 3.87 per cent.

On an annual basis, cereals became dearer by 3.62 per cent, while rice and wheat were up by 2.08 per cent and 0.29 per cent, respectively.

Vegetables were up by 11.41 per cent. Potatoes became 5.30 per cent costlier and onion prices went up by 8.48 per cent.

During the week under review, inflation in non-food articles was 27.56 per cent. Fibres became dearer by 86.90 per cent, while fuel and power was up by 13.13 per cent.

Petrol became dearer by 23.14 per cent on an annual basis.

ICRA`s Nayar said the decline in prices of pulses was offset by an increase in the prices of vegetables, fruits, and protein-based items.