Food inflation falls to two-month low of 11.05 pc

Food inflation fell by 2.02 percentage points for the week ended February 5 from 13.07 per cent in the previous week.

"... In quite some time, food inflation will also be under single digit," Mukherjee said, adding that headline inflation will moderate to 7 per cent by March-end from 8.23 per cent in January.

Driven by high vegetable prices, food inflation has been in double digits for the past two months and had even crossed 18 per cent in the last week of December.

On an annual basis, prices of potatoes declined by 13.63 per cent, pulses by 5.88 per cent and wheat by 2.54 per cent in the week ended February 5.

However, on the whole, vegetables became nearly 24 per cent costlier during the week ended February 5. This was primarily on account of onions, which were 31.33 per cent higher during the week on an annual basis.

The spike in food prices, especially during December and January, has become a cause of concern for the government and it has taken several measures to tame it.

A Group of Ministers (GoM) on Food, headed by Mukherjee, met today to take stock of the situation.

Meanwhile, the decline in food inflation for the past two weeks prompted Planning Commission Deputy Chairman Montek Singh Ahluwalia to say the trend would continue.

Other economists, however, said while there would be further moderation in vegetable prices, overall food inflation will remain in double digits in this month.

"While vegetable prices may ease further in the coming weeks, prices of other food items are likely to remain sticky and average food inflation may remain in the low double-digits in February, 2011," ICRA Economist Aditi Nayar said.

Even though prices have come down over the previous week, the average rate of food inflation on a yearly basis, at 17 per cent, is still high.

"The yearly average of food inflation is still very high, as onions and vegetables remain high, which is a cause of concern," Dhanlaxmi Bank Head (Policy & Research) Rajrishi Singhal said.

The Finance Minister also sounded cautioned that a weekly decline in food inflation could be "deceptive". He, however, expects wholesale price index (WPI)-based inflation to come down to 7 per cent by March-end.

"I hope, as I mentioned earlier, by March we able to reach overall inflation of 7 per cent," Mukherjee added.

Headline inflation, as measured on the basis of the WPI, moderated to 8.23 per cent in January from 8.43 per cent in the previous month.

During the first week of February, the fuel price index was up 11.92 per cent for the week.