Moderation in food inflation no great comfort for Pranab

Food inflation declining to a 20-month low of 7.33% in mid-July has not come as a great consolation to Finance Minister Pranab Mukherjee, who said the pressure of price rise is still evident.

"There is still inflationary pressure (in the economy)," Mukherjee told reporters here, after release of latest data.

The Finance Minister, who had said yesterday that it was not "end of the tunnel" as far as inflation and the rising interest rates are concerned, described today's data on food inflation as showing no firm trend.

"These weekly figures fluctuate mainly on the base (effect). Therefore, they do not show any definitive trend," he said.

Food inflation, as measured by Wholesale Price Index, declined to 7.33% for the week ended July 16 from 7.58% in the previous week.

The fall was mainly on the back of cheaper pulse prices which dropped by 8% year-on-year, even as other food items like fruits and vegetables, including onions, became expensive.

In the backdrop of inflationary pressures, the government does not find comfort despite the rate of price rise of food items falling to its lowest since November 2009, when the system of separate weekly data on food prices was introduced.

The moderation is also being attributed to the high inflation figure of 18.56% for the corresponding year-ago period, a phenomenon dubbed as the 'high base effect' in economic parlance.

The pressure is evident in primary articles which recorded inflation of 10.49% for the week ended July 16, though down from 11.13% in the previous week.

Prices of non-food articles like fibres, oil seeds and metals went up sharply to 16.05% from 15.50% in the previous week.

Headline inflation stood at 9.44% in June. The RBI has already hiked interest rates 11 times since March, 2010, to tame demand and curb inflation.

In its quarterly review earlier this week, the RBI raised its overall inflation projection for March, 2012, to 7% from 6% estimated earlier, "in view of the domestic demand-supply balance, global trends in commodity prices and the likely demand scenario".