New Delhi: Due to a sharp fall in the prices of vegetables, food inflation on Thursday dropped to 7.7 per cent, the lowest in 18 months, for the week ended April 30.

The government, however, warned that the price rise of non-food items would continue to pose problems in the days ahead.

Food inflation, as measured by Wholesale Price Index (WPI), was 8.53 per cent in the previous week. It had stood above 21 per cent in the last week of April 2010.

India is estimated to have achieved record foodgrain production of 235.88 million tonnes in the 2010-11 crop years (July-June).

This is on the back of all-time high output of wheat, pulses and maize. Apart from foodgrains, the country has produced a record quantity of oilseeds -- 30.25 million tonnes.

His reaction came in response to the decline in food inflation numbers to their lowest level since separate data for the segment was introduced in late 2009.

During the week under review, prices of pulses declined by 9.05 per cent year-on-year, while vegetables became cheaper by 3.64 per cent. Potatoes also came down by 3.58 per cent.

He, however, exuded hope that recent monetary policy measures like the Reserve Bank's hike in policy rates, would help in addressing the issue.

The RBI had hiked interest rate by 50 basis points earlier this month to tame demand and control inflation. It was the ninth hike in short-term lending and borrowing rates made by the central bank since March, 2010.

Headline inflation was 8.98 per cent in March, much above the government's comfort zone of around 5 per cent. In its monetary policy for 2011-12, the RBI had projected inflation to average 9 per cent during the first half of this fiscal before moderating to around 6 per cent by the year-end.

Though rising food prices were the main contributor to inflationary pressure in 2010, recent months have witnessed a rise in prices of core (non-food) items. Core inflation was above 7 per cent in March.

During the week under review, inflation in non-food primary articles was 28.62 per cent during the week under review.

Global oil prices continue to hover around USD 100 per barrel on account of the civil war in Libya, a major exporter and OPEC member, though it is down from the two-and-half high of over USD 120 per barrel touched in April.

While pulses and vegetables showed a moderation in prices during the week ended April 30, other food items became more expensive year-on-year.

Cereals became dearer by 4.54 per cent, while fruit prices were up by over 35 per cent on an annual basis. Onions grew 12.42 per cent more costly on an annual basis.

Non-food items matter of concern: Pranab

Encouraged by the moderation in food inflation, Finance Minister Pranab Mukherjee on Thursday said the rate of price rise of kitchen items would decline further in the coming weeks, though prices of non-food items would continue to remain a matter of concern.

"We hope to see further moderation in food inflation in the coming weeks," Mukherjee said in response to a decline in food inflation to an 18-month low of 7.7 per cent for the week ended April 30, due to a drop in the prices of pulses and vegetables, especially potatoes.

The recent monetary policy announcements should help in addressing these concerns, he added.

He further said, "Even though food inflation is declining, the concern on higher core inflation remains." Cost-push inflation is a type of inflation caused by substantial increases in the cost of important goods or services where no suitable alternative is available.

Industrial growth slowed down to 7.8 per cent in 2010-11 from 10.5 per cent in the previous fiscal mainly on account of the poor performance of the mining and manufacturing sectors, coupled with lower production of capital goods, data released on Thursday showed.

The growth in factory output in March, as measured in terms of the Index of Industrial Production (IIP), indicated that it has improved to 7.3 per cent from 3.6 per cent in February this year.

But the IIP growth in the March last year was much higher at 15.5 per cent.

The decline in the food price segment is seen as a breather for the government, as inflation has stubbornly remained high despite its fiscal measures and the RBI's monetary steps.

(JPN/ Agencies)