Improved supplies keep food inflation nearly flat at 16.24%

NEW DELHI: Food inflation eased marginally to 16.24% for the week ended September 25, from 16.44% in the previous week, as improved supplies lowered prices. The wholesale price index for food articles declined 0.1% as a sharp drop in prices offset an increase in cost of vegetables.

The index for primary articles rose 0.1% during the week, pushing up inflation to 18.53%, but fuel inflation remained unchanged at 10.73%, data released on Thursday showed.

The government is counting on the winter crop to moderate food prices. "It is difficult to predict, but I think food prices are expected to soften from November with new crop hitting the market from mid-October," said chief statistician TCA Anant in Kolkata on Thursday. Heavy rainfalls in North India till late September had caused disruptions in supply of fruits and vegetables to the wholesale centers, or vegetable mandis, fueling inflation.

Transportation costs had also gone up substantially in this phase, adding to the price rise due to the demand-supply gap. Anant expects food inflation to drop to 7-8 % by the end of the current fiscal. The IMF also attributed India’s high overall inflation to food prices. “Notwithstanding the robustness in domestic demand, the pickup in inflation in 2010 reflected mainly higher food prices rather than core inflation,” the multilateral agency said on Wednesday.

Even RBI sees prices as the biggest concern with the governor Duvvuri Subbarao saying that inflation will determine its next policy action.