New Delhi: Food inflation has dropped marginally to 8.06 percent for the week ended May 21, but the rate of inflation for non-food items continued to hover above 20 percent.

The Centre said it expects inflation to moderate in the coming weeks, but cautioned against uncertainty over oil prices in the international market.

"... If the declining trend in food items and non-food primary items articles continues, then perhaps it will be possible to have a moderate rate of inflation," Finance Minister Pranab Mukherjee said.

While inflation of food items, as measured by the Wholesale Price Index (WPI), fell to 8.06 per cent during the week under review from 8.55 per cent in the previous week, non-food primary articles registered inflation of 21.31 per cent, as against 23.22 per cent.

Inflation of fuel items, however, increased to 12.54 per cent from 21.11 per cent in the previous week, mainly on account of an over 32 per cent jump in the index for petrol.
The oil marketing companies increased the price of petrol by over Rs 5 per litre from May 15.

The fall in food inflation numbers is basically on account of decline in prices of pulses, wheat and vegetables.

"The important figure is the non-food WPI. There is practically a two percentage point decrease from 23.22 per cent to 21.31 per cent (in it). My comment is that there will be a moderation on inflation," Mukherjee said.

He said the decline is evident in overall primary articles as well.

Overall, inflation in primary articles rates stood at 10.87 per cent during the week under review as against 11.60 per cent in the previous week.

Mukherjee, however, added that uncertainty still prevails in respect of fuel prices.

Global crude prices are currently above USD 100 per barrel, mainly on account of conflict in the Middle East and North Africa.

After the hike in petrol prices, the retail rates of diesel and LPG are also expected to be hiked very soon and this will also get reflected in the inflation data over time.

The Finance Minister called for a look at the broader picture, instead of regular inflation figures.

On the other hand, experts said the decline may be temporary and caution is required.

"The numbers have shown some improvement, but it is too early to say that inflation will fall in the coming months," financial services firm KASSA director Siddharth Shankar said.

He added that the full impact of fuel price hike could take some more time to become visible.

As per data released by government today, prices of pulses were down by 9.22 per cent year-on-year, while wheat became cheaper by 0.77 per cent.

This seems to be on account of record production of wheat and pulses during the 2010-11 crop year (July-June).

During the week under review, prices of vegetables overall were down by 1.06 per cent on an annual basis, while potatoes became cheaper by 2.15 per cent.

However, prices of other food items became more expensive. Fruits were up by 30.51 per cent and onions by 12.32 per cent year-on-year.  Milk became dearer by 7.04 per cent and eggs, meat and fish became 5.50 per cent costlier. Cereals became dearer by 4.78 per cent, with prices of rice going up by 2.51 per cent.

In the non-food primary articles segment, fibres became dearer by 55.82 per cent and minerals by 11.78 per cent. Though high, the rate of price rise of fibres was lower than the over 60 per cent jump reported during the previous week.

The recent hike in retail prices of petrol was also reflected in the data. Petrol was up 32.41 per cent annually, after standing consistent at 21.81 per cent during the previous few weeks.

Fuel and power overall was up 12.54 per cent as against a growth of 12.11 per cent in the previous week.

The government and Reserve Bank had said that in the months to come, inflationary pressure would be more from core (non-food) items on account of high global prices of commodities, particularly crude.

A rise in prices of food items was the main reason for inflationary pressure during 2010. Food inflation was in double digits for most of last year, before showing signs of moderation from March this year.