Food inflation eases to 16.91%, prices still high

Amid mounting concerns over rapidly rising food prices, wholesale food inflation for the week ended January 1 moderated to 16.91 per cent from a 23-week high of 18.32 per cent in the previous week ended December 25, 2010.

Despite the deceleration in the inflation rate for food items, prices, particularly that of vegetables, continued to show significant increase on a week-on-week basis.

Finance Minister Pranab Mukherjee said the government had taken steps to contain inflation and it would fall in coming weeks. “We have analysed the situation. We have indicated that further steps we are going to take. We have also indicated that there should not be any panic”, said Mukherjee.

When asked whether the government would be able to control inflation, Mukherjee replied: “Of course, we will be able to.”

Prime Minister's Economic Advisory Council Chairman C Rangarajan also expressed hope that there would be some softening in food prices. “I expect some softening of food prices in the coming weeks, coming months. There is normally a seasonal decline in these months (November and December) but, unfortunately, that was not seen,” he said.

The double-digit inflation rate also comes over a high base of 2010 when food inflation stood at 19.65 per cent. Given the recent spurt in prices, analysts are skeptical about a significant easing in prices, though the base effect is expected to dampen the rise and the government may take firm steps to curtail inflation in food articles. However, most expect a mild trend of moderation in the weeks ahead.

“I do see the beginning of an easing trend in the week-on-week inflation, especially since the spike was caused by onion prices and that seems to be easing now with the arrival of fresh supplies,” said N Bhanumurthy, economist with the National Institute of Public Finance and Policy, a Delhi-based think tank.