New Delhi: Shattering a fortnight-long rise, food inflation dropped to 8.53 per cent in the week ended April 23 as pulse prices eased, even as Finance Minister Pranab Mukherjee called for global measures to control volatility in prices.

During the week under review, wholesale prices of pulses declined by 7.39 per cent on a year-on-year basis. However, all other commodities witnessed a rise.

In the previous week food inflation was 8.76 per cent. However, the rate of price rise of food items is much lower now than the 20.91 per cent reported in the corresponding week
of last year.

Experts, however, said global commodity prices, mainly of crude oil, will have further impact on the country's overall inflation and that the Reserve Bank was likely to hike its interest rates further.

FM for global efforts

Speaking at the Asian Development Bank's annual meeting in Hanoi, Mukherjee said the recent instability in international food and fuel prices has triggered fresh challenges in management of inflation and could well turn out to be a long-term global problem.

"Management of inflation, in addition to domestic efforts, will increasingly have to be a globally coordinated effort. Inflation, particularly, the increase in food prices is a major concern for India as well as other developing countries," he said.

We are looking at easing of the price situation in India with adequate buffer stock and hopefully a good monsoon", Mukherjee told reporters in the Vietnamese capital.

CEA to review price situation

An Inter-Ministerial Group headed by Chief Economic Advisor Kaushik Basu will hold a meeting here on Friday to review the price situation in the country.

Basu said while inflation remains at "unacceptably high" level it is expected to moderate. "I am expecting it will dip down a bit," he said.

He said the inflation for April would be "definitely below nine per cent", a line which is in variance with RBI's average projection.

In its monetary policy, which was mainly focused on inflation control, the RBI projected overall inflation to fall to around 6 per cent by March 2012.

The RBI has hiked its interest rate nine times since March 2010. The latest round of hike of 50 basis points in the short-term lending and borrowing rates came on May 3 during the
release of the annual monetary policy.

Commodity rates to affect core inflation

Headline inflation has been above 8 per cent since January 2010. It stood at 8.98 per cent in March this year. Economists said rising global commodity prices, especially oil which has crossed USD 110 per barrel on account of political turmoil in Middle East and North Africa, will put increasing pressure on core inflation, which does not factor in food prices.

The domestic prices are also likely to be increased next week.

"Oil prices are an area of concern with most of our needs being met by imports and the global prices are quite high. If inflation continues, RBI will have to increase rates by another 50 basis points," Crisil chief economist D K Joshi said.

During the week under review, cereals became dearer by 4.42 per cent year-on-year, with rice and wheat becoming more expensive by 2.08 per cent and 0.06 per cent respectively.

Vegetables prices were overall up by 3.44 per cent. Potatoes became dearer by 0.27 per cent on an annual basis and onions rose by 16.09 per cent.

Fruits and protein-based items continued to become more costly.

Fruits became dearer by 32.69 per cent year-on-year, while milk was up by 5.16 per cent and eggs, meat and fish by 5.13 per cent.

The rate of price rise of non-food primary articles stood at 27.84 per cent.

Fibres became expensive by 85.58 per cent year-on-year, while fuel and power was up by 13.53 per cent and petrol by 21.81 per cent respectively.

"The marginal decrease in the weekly food inflation rate is of low relevance. Of larger significance is the persistent level of headline inflation," Deloitte, Haskin & Sells director Anis Chakravarty said.