Food inflation eases, but stays above 16 percent

Economists expect a substantial fall only after September post-monsoons

PTI | May 28, 2010



Food inflation eased marginally to 16.23 per cent as of May 15 on cheaper food grains, but held out above the 16 per cent mark for the fifth straight week due to costlier fruits and vegetables.

In the week ended May 8, food inflation was 16.49 per cent and has been hovering this level since the start of the year. It had shot past 20 per cent in December last year.

While food grain prices eased with arrival of rabi (winter) crops in the market, economists said they expect a substantial fall only after September when the monsoon plays out.

Monsoon, which accounts for over 80 per cent of rains in India, is expected to hit the Indian coast in early June. The India Meteorological Department expects monsoon to be 98 per cent normal this year, after a poor showing last year that hit crop output and fueled rise in food prices.

"Food inflation will remain at this level for some time. Unless monsoon scenario becomes clear, nothing can be said. However, we can expect a substantial decline in food prices in the second half," Crisil's chief economist D K Joshi said.

Planning Commission member Abhijit Sen recently said the food inflation will come down to 4 to 5 per cent by November.

Prime Minister Manmohan Singh too during the week said that overall inflation would be brought down to 5-6 per cent level by December.

Wholesale prices-based inflation shot above 10 per cent in February, although they are provisionally lower at 9.59 per cent in April.

"Prices of foodgrains have definitely come down with the arrival of rabi crop and government buffer stocks. What has not eased is the price of fruits and vegetables due to heat wave conditions," said an economist who did not wish to be named.

Foodgrain prices, which was up 21.15 per cent at the start of the year, cooled to 9.77 per cent in the first week of May. However, inflation in fruits and vegetables have not changed much. It was 9.20 per cent in the first week of January and was 8.82 per cent in the first week of May.

Over the week ending May 15, non-food articles also saw a decline in prices. Cotton seed prices fell 2 per cent and raw rubber and mustard seed by 1 per cent each. However, prices of tea rose by 9 per cent, that of mutton by 5 per cent, and urad and spices by 1 per cent each.

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