Food inflation up to 8.69%, experts say minor blip

Snapping a seven week declining trend, food inflation went up marginally to 8.69 per cent for the week ended November 27, as experts exuded confidence the mild rise will not impact an overall downward trend.

Economists, however, feared a steeper inflationary pressures due to rising global commodity prices, particularly oil. The marginal rise in food inflation is due to increase in prices of onions, fruits and milk.

Food inflation for the previous week ended November 20 was 8.60 per cent, which was the lowest since May 2009. However, food inflation still looks under control if compared with the over 20 per cent during the corresponding week of last year.

The government says it is optimistic of containing food prices, an issue that haunted it for much of the year due to its spiralling nature.

Finance Minister Pranab Mukherjee, during the consultative committee meeting of his ministry, maintained the government has taken several fiscal and administrative measures to contain the price rise and continues to be vigilant on the price front.

He termed as "silver lining" the decline of overall food inflation during the October to 9.97 per cent.

"...With normal rainfall, the kharif production is now expected to rise by over 10 per cent year on year for food grains and even higher for cash crops such as cotton and sugarcane," Mukherjee said.

Economists said the marginal rise of 0.09 percentage points for week ended November 27 is not of much concern and that minor ups and downs are part of the overall trend in food prices.

"Statistically speaking, it is not a reversal of the downward trend. The downward trend will continue and we think it will also aid in reducing the overall inflation to around 5.5-6 per cent by March 2011," Principal Economist of "Deloitte in India" Shanto Ghosh said. 

He said international oil prices, impacted by a severe winter in Europe, may affect overall inflation for the year more than food.

Freezing temperatures in Europe helped push oil prices above $89 a barrel in Asian trade today. However, in India fuel and power prices did not show any change during the week ended November 27.

On a weekly basis, prices of all items moved in a narrow range, except onions which became dearer by around 5 per cent. Axis Bank's Senior Vice President Saugata Bhattacharya attributed this to damage of onions crop in Maharashtra due to unseasonal rains.

In its Mid-year Analysis of the economy released earlier this year, the government had said it expects wholesale price index to come down to 6 per cent by end of the fiscal.

Chief Economic Advisor Kaushik Basu had also said that overall inflation will slide to 7.5 per cent in November, figures for which will come out early next week. Overall inflation, which also factors in manufactured goods, primary articles and fuels, was 8.58 per cent in October.

Even though food inflation for the week under review look small compared to a year ago period, onion prices went up by 25.8 per cent, fruits by 18.31 per cent and milk by 17.76 per cent on an annual basis.

RBI had earlier said that food inflation has become a structural problem since consumption pattern of Indians have gone a change. As there is higher intake of protein based items, their prices are rising steeper.

Egg, meat and fish turned costlier by 16.16 per cent on yearly basis. However, prices of another protein based item -- pulses were down 10.91 per cent.

Wheat prices went down by 3 per cent on an annual basis, while vegetables became cheaper by 3.42 per cent. This was largely aided by a sharp dip in potato prices that came down by as much as 45.40 per cent.