New Delhi: Bringing some relief to the government, food inflation dropped to single digit at 9.52 per cent in February end after a gap of three months. The fall was triggered by declining prices of potato and pulses.

It has fallen to a single-digit figure for the first time since the week ended December 4, 2010, when it stood at 9.46 per cent.

Food inflation slumped by 0.87 percentage points from 10.39 per cent in the previous week.

"Food inflation is in single digit... It will come down to below 7 per cent by the end of March," Prime Minister's Economic Advisory Council Chairman C Rangarajan said.

RBI to continue monetary policy

The easing of food inflation, however, may not stimulate the Reserve Bank to halt monetary tightening as some essential commodities are still dearer and rising commodity and crude oil prices will have bearing on the rate of price rise.

"RBI is expected to continue with its current policy and hike short-term lending and borrowing rates by 25 basis points each in the next quarterly review later this month," Crisil chief economist D K Joshi said.

The RBI will come out with mid-quarterly policy review on March 17.

"The fall was expected. We believe that henceforth food inflation will continue to be low and will be less of a driver in the overall inflation," Joshi said.

He, however, added that other factors like the current high prices of crude in the international market may affect the overall inflation.

The RBI had already hiked short-term rates seven times since March 2010 to contain inflationary pressure.

Crude oil to feel pinch

Experts said that crude oil which has already topped the levels of 2008 on account of political unrest in the Middle East is expected to feel the pinch as inflationary pressure would now shift from food to other commodities.

ICRA Economist Aditi Nayar said, "Given the potential adverse impact on inflation if crude oil prices remain elevated globally, the RBI is expected to increase the repo and reverse repo rates by 25 basis points in the upcoming mid-quarter policy review.

Food prices behind high inflation

High food prices have been one of the major factors behind high overall inflation.

Though prices of wheat, pulses and potatoes went down during the week under review, other food items continued to remain dearer.

Prices of wheat, for the week under review, declined by 1.07 per cent on an annual basis, while pulses rates fell by 3.91 per cent.

Prices of potatoes also fell by nearly 9 per cent year-on-year. Prices of the vegetables group went up by 9.23 per cent on annual basis.

In particular, onion prices were up by 3.90 per cent year-on-year.

Rice became dearer by 1.16 per cent year-on-year. Egg, meat and fish became 15.38 per cent costlier.

Meanwhile, fruits prices rose by 18.75 per cent and milk by 8.42 per cent on an annual basis.

The non-food articles category saw a price rise of 29.85 per cent during the week on an annual basis.

Fuel and power also became 9.48 per cent more expensive, while petrol became costlier by 23.14 per cent.

 

(Agency)