Fall in onion, potato prices takes inflation to 7-week low of 8.84%

Food inflation fell 0.63 percentage points to a seven-week low of 8.84 per cent for the week ended September 10, after hovering at a little over nine per cent for a long time on the back of declining rates of price rises in onions and potatoes, and partly due to a high base effect.

The latter was visible since food inflation stood at 16.30 per cent during the corresponding week of last year. In the previous week, it stood at 9.47 per cent. Economists said once the kharif crops hit the market, food inflation would moderate further. However, price pressure on protein-based food items, particularly in meat, eggs and fish, continue. The Reserve Bank of India (RBI) has time and again said supply mismatches with the rising demand of such items.

Onions, the escalating prices of which had earlier led the government to impose a ban on their exports before it lifted the restriction this week, saw inflation coming down to 28.92 per cent during the week against 42.98 per cent a week earlier. Similarly, the rate of price rise in potatoes was down to 13.78 per cent from 21.16 per cent in the previous week.

Onion prices were a major cause of worry for some weeks, as it was seen to be building pressure on overall food inflation. Economists, however, had shrugged that off as a temporary phenomenon, as the monsoons were good.

Vegetables altogether saw their price rise cooling to 12.13 per cent from 17.47 per cent.

However, there was a surge in inflation on pulses. It rose to 1.49 per cent for the week, after remaining in a negative zone for a long time. Egg, meat and fish saw inflation moving up to 9.28 per cent from 5.97 per cent the week before. Milk inflation also moved up marginally to 10.38 per cent from 10.02 per cent.

The food index rose to 195.7 points during the week ended September 10 from 195.4 in the previous week. “On a sequential basis, the inflation in food articles has risen but once the crops hit the market, this number will fall,” said Siddharth Shankar, director of the financial services firm, KASSA.

Inflation in the non-food category also declined to 17.42 per cent from 18.49 per cent, while fuel and power saw the rate of price rise steady at 13.96 per cent. The Rs 3.14 a litre hike in petrol prices last week were not captured in this data. The RBI had hiked policy rates for the 12th time last week, drawing criticism from certain quarters, since food inflation is also a supply side issue. At a recent seminar of the finance ministry, Planning Commission, RBI officials and economists, it was argued that government managers lacked full understanding of the reasons behind the rise in inflation.