Breaking 4-week trend, Food inflation up at 8.55%

NEW DELHI: Food inflation rose to a four-week high of 8.55% for the week ended May 14 as prices of cereals, vegetables and milk rose during the week, but experts said the reversal in trend was not a big worry. Food inflation was up a sharp 1.08 percentage points during the week from 7.47% in the previous week, official data showed.

The annual rate of inflation in the fuel and power category remained unchanged at 12.11% during the week.

“This recent increase doesn’t necessarily imply a change in the falling trend,” said DK Joshi, Chief Economist, CRISIL. “Food inflation will remain soft as the expectations are of a normal monsoon,” he said.

Food articles have a 14% weight in the wholesale price index. The acceleration in the food inflation will put pressure on the headline inflation. The recent increase in petrol prices has also not yet showed up in the fuel index. The government is also considering revision in price of diesel and kerosene.

The higher fuel inflation will reflect in the headline inflation and also have spillover effect on other prices. The drivers of food inflation appear to be changing. The high inflation in fruits, 32.4% for the week ended May 14, has kept the overall food inflation high, but incrementally cereal are adding more to the price rise. The annual rate of inflation in the case of cereals has risen to over 5% from about 2% in February.

The rising prices of milk, egg, meat and fish over the last few weeks have also contributed to the reversal in the trend. The government has maintained that the weekly numbers should not be given undue importance. The government puts out weekly indices for primary articles and fuels. The entire wholesale price index – which includes manufactured goods that have the maximum weight in the index – is put out once a month.