The effect of a slide in the festival-season demand has begun to show, as food inflation eased to 10.63 per cent for the week ended November 5 from 11.81 per cent in the previous week. However, prices of some vegetables, especially tomato, continued to surge.
That apart, the government sounded relieved on Thursday. “If the trend continues, some relief can be expected on the price front,” Finance Minister Pranab Mukherjee told reporters here. “This is a good sign.”
As per the latest data released by the government, the prices of vegetables moved up from 26.05 per cent to 27.26 per cent, while onions became cheaper by 22.89 per cent.
Experts sense positivity in the development. “This decline is good,” says Siddharth Shankar, director of KASSA Group. But the economist has a word of caution: “Over long run, though, we still need to set right the fundamentals of fiscal deficit agriculture production if we wish to see the numbers on the lower side of the target range.”
Potatoes also became costlier by 1.61 per cent — from 0.53 per cent a week earlier. Tomatoes, too, got expensive — by 138.7 per cent — during the week ended November 5, from over 100 per cent the earlier week.
Though it has a minuscule weight of 0.26 per cent in the overall inflation and 1.8 per cent weight in food inflation, the highly elevated numbers are definitely affecting food inflation. Agriculture economists attribute this to constraints in supply from Himachal Pradesh, which has not had sufficient rains after the monsoon this year.
As for fruit, inflation subsided substantially — to 5.99 per cent from 11.70 per cent — as the festive season concluded.
Cereals and rice saw inflation declining. Pulses, on the other hand, inched up further to 14.44 per cent from 13.27 per cent the week before. However, inflation in wheat declined further to -3.63 per cent from the earlier number of -1.77 per cent.
Fuel and power saw inflation going up as oil marketing companies went for a Rs 1.82 per litre price hike in petrol. Petrol inflation surged to 30.43 per cent from 27 per cent the earlier week.
The Reserve Bank of India (RBI) had, in its October 25 mid-quarter review of the monetary policy, hinted at taking a pause after having increased key policy rates 13 times since March 2010. This, the central bank said, would be done if inflation started easing from December. The overall inflation, based on wholesale price index, stood at 9.73 per cent in October — marginally up from 9.72 per cent in September. Reason: Rise in prices of food items.
RBI, in its latest quarterly review of the monetary policy, said it expected inflation to remain elevated till December on account of a demand-supply mismatch, before moderating to seven per cent by March 2012. Many economists have said high food inflation cannot be pinpointed to a few items, and it was becoming a larger systemic problem due to high input costs and rising demand.