Food inflation in double digits at 11.40%

Food inflation, as measured by the Wholesale Price Index (WPI), rose to 11.4 per cent for the week ended July 31, around two percentage points more from the previous week.

The inflation rate entered the double digits after moderating to single digit in the second week of July. Food inflation has been moderating since the second week of June after consistently being in high double digits for over a year.

“Food inflation is not a surprise at all... Last year, in this week, it fell sharply and then increased again. So, the increase in the food price inflation is pure (low) base effect,” Planning Commission Deputy Chairman Montek Singh Ahluwalia said.

Even as food inflation increased, prices of food articles registered significant decreases during the week under consideration. Analysts stated that the spurt in the inflation rate in the week is a pure statistical phenomenon as food inflation had suddenly dipped to 12.77 per cent from a 16.47 per cent during the corresponding period last year.

“Inflation situation in the medium-term remains something of a concern but today it is not something which shows that the situation has got worse,” Chief Economic Advisor to the finance ministry, Kaushik Basu, told reporters after the Reserve Bank of India’s Board meeting here today.

The divergence in the base has resulted in a sudden spurt to the inflation rate in the week under consideration.

“This is a purely statistical base effect and food prices are clearly on a downward trend. The peak of food inflation is behind us and given good monsoon and kharif crop prospects, prices will further go down,” said Shubhada Rao, chief economist, YES Bank.