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Food inflation falls to 9.55%
September, 09th 2011

Food inflation was back to single digit at 9.55 per cent for the week ended August 27 after rising to double digits in the previous week, but the rate of price hike in food items has been above nine per cent for the fifth week in a row. Non-food items like minerals saw a rise in inflation, prompting finance minister Pranab Mukherjee to call it a discouraging trend.

He also said food prices will remain volatile in festival season and would moderate after the period comes to an end, but non-food inflation is a worry. Food inflation basically fell because the rate of price rise in onions fell from 57.01 per cent in the previous week to 42.03 per cent for the week under review.

This is mainly because of base effect since in the corresponding weeks of last year, inflation in onions has risen from (-) 2.54 per cent to 1.04 per cent. Otherwise, price pressures are persisting in onions. Despite onion inflation coming down, the rate of price rise in vegetables rose to 22.42 per cent from 15.78 per cent a week ago, clearly showing that other vegetables saw significant price rise for the week. For instance, inflation in potatoes rose to 13.38 per cent against 13.31 in the previous week. However, protein-based items like eggs, meat, fish and milk as well as fruits saw the rate of price rise coming down.

Mukherjee said, During the festive season, there will be some fluctuations (in food prices). But after that, moderating influence will continue.

However, he expressed concern at non-food category in primary articles (those in raw form) witnessing a rise in inflation. Inflation in these items rose to 19.88 per cent from 17.19 per cent a week ago. Minerals saw the rate of price rise going up at 27.48 per cent from 24.42 per cent, while inflation in fibres rose to 38.60 per cent from 37.66 per cent.

Though food inflation has come down... (inflation of) other items has increased substantially, particularly the non-food primary articles, which is not at all encouraging, the finance minister said.

In this situation, economists do not expect the Reserve Bank of India (RBI) to press a pause button on its rate hiking spree. Quite contrary to the expectation of 25 basis points hike by the RBI in its policy review later this month, Sidharth Shankar, director, financial services firm KASSA called for high rate hikes to tame inflation.

Small rises of 25 to 50 basis points would have no impact on consumption patterns. A little stricter stance has to be taken by the RBI wherein the consumerism is bought down to realistic levels, he added.

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