Food inflation declined to a seven-week low of 13.07 per cent in end-January, as prices of potatoes and pulses eased, even as consumers continue to feel the pinch of high rates of vegetables.
Food inflation, which snapped the three-week rising trend, fell by nearly 4 percentage points from 17.05 per cent in the week ended January 22. It was 22.08 per cent a year-go.
The last time food inflation has come down to such a level was for the week ended December 11 when it stood at 12.13 per cent.
Experts said there would be further slide in inflation rates due to the expected record crop of wheat and pulses.
Government estimates suggest overall food grain production for 2010-11 at 232.07 million tonnes, against 218.2 million tonnes last year.
Wheat production is estimated to touch an all-time high of 81.47 million tonnes in 2010-11 crop year.
Pulses and cotton production are also projected to set fresh records of 16.51 million tonnes and 33.9 million bales, respectively.
“In the coming weeks we could expect further moderation in food prices, specially foodgrains. The expected record production of wheat and pulses will act as a factor in easing the food prices,” Crisil chief economist D K Joshi said.
However, the decline in food inflation is unlikely to show much impact on the headline inflation numbers for January, which is expected on February 14. The inflation in December stood at 8.43 per cent.
“The overall WPI inflation for January 2011 is expected at around 8.5 per cent, on back of high primary inflation,” ICRA economist Aditi Nayar said.
The decline in food inflation numbers is also unlikely to ease pressure on Reserve Bank, whose current monetary policy stance is anti-inflationary.
The apex bank had last month raised short term lending and borrowing rates by 25 basis points to tame rising prices.
During the week ended January 29, prices of pulses fell 8.63 per cent, potatoes by 8.87 per cent and wheat by 3.58 per cent on an annual basis, data released by the government showed.
Onion prices, which more than doubled in the previous week, have eased subsequently. However, the kitchen staple still remains dearer by 79 per cent for the week under review.
Last month, government pumped in 300 metric tonnes of imported onions and would bring in another 426 tonnes in the market soon.
Vegetables as a whole have turned costlier by 44.34 per cent on an annual basis during the week under review.
ICRA’s Nayar, however, said that vegetable prices are expected to ease in the coming weeks.
During the week, fruits and milk became costlier by 10.46 per cent and 11.66 per cent respectively, while egg, meat and fish turned expensive by 17.06 per cent.
Experts, however, said that high international crude prices may act as a dampener in moderating the headline inflation.
In its quarterly review last month, the RBI estimated that overall inflation would be around 7 per cent by March-end.
For the week ended January 29, “fuel and power” category prices shot up 11.61 per cent on an annual basis, while petrol became expensive by over 30 per cent.
“The Egypt situation has potential to affect inflation,” Joshi said, referring to the current impasse in the Arab nation where demonstrators have been on the streets since last month demanding immediate resignation of long-time ruler Hosni Mubarak.
There is apprehension that the political stalemate in Egypt could affect flow of crude through the Suez Canal, the world’s busiest commercial waterway.
Similar views have already been expressed by the Finance Minister Pranab Mukherjee, senior government officials and the RBI deputy governor Subir Gokarn.