Food inflation dips to 7.58% on cheaper pulses, cereals

Food inflation eased to 7.58 per cent for the week ended July 9, with even dairy products and protein-based items witnessing a decline in the rate of price rise. The moderating trend may, however, not stop the Reserve Bank of India from another rise in the repo rate in its monetary review the coming Tuesday.

Food inflation was 8.31 per cent in the previous week. The high base effect, of a 19.52 per cent rate at this period last year, also helped the fall.

“If this declining trend continues, I do hope it will have a moderating influence on the price front,” Finance Minister Pranab Mukherjee told reporters. “The trend is encouraging in the domestic sector. But we do not have control over international issues. International commodity prices, fuel prices and the influence of the external inflationary pressure could have some adverse impact.”(Click here for graphics)

Economists say food inflation would fall further, if the monsoon remains normal. Inflation in onions dropped substantially to 19.68 per cent from 30.72 per cent in the previous week.

Inflation in eggs, meat and fish declined to 7.97 per cent compared to 11.95 per cent, while the rate of price rise in milk saw a deceleration to 10.76 per cent from 12.39 per cent.

Even then, the Reserve Bank is likely to raise the repo (short-term lending) rate by 25 basis points, as overall inflation still stood at 9.44 per cent in June.

“Since the headline inflation is hovering over nine per cent, RBI would focus on bringing down that number, after which it may pause till the third quarter of this fiscal,” said Anis Chakravarty, director, Deloitte Haskins & Sells.