New Delhi: Food inflation has jumped to a two-month high at 9.01 percent for the week ended May 28 amid costlier fruits, onions and protein-based items.  

Food inflation, as measured by the Wholesale Price Index (WPI), was 8.06 per cent in the previous week. In the last week of May, 2010, it was as high as 20.62 per cent.

The last time when food inflation was above 9 per cent was for the week ended March 26, when it had stood at at 9.18 per cent.

As per data released by the government today, fruits became 30.78 per cent more expensive year-on-year, while onions were up by over 14 per cent.

In addition, milk prices went up by 8.49 per cent and egg, meat and fish became dearer by 6.99 per cent. Cereals also became costlier by 5.77 per cent on an annual basis.

"If the monsoon is favourable, food prices will come down over the next 2-3 months," Prime Minister's Economic Advisory Council Chairman C Rangarajan said.

Other experts also expressed a similar opinion on the role of the monsoon.

"The progress of the monsoon will play a major part in determining the food inflation trajectory. If the monsoon is normal, we may well see a moderation in the rate of price rise of food items in the months to come," Standard Chartered Head of Research Samiran Chakraborty said.

Following its arrival in Kerala in the last week of May, the monsoon has progressed till Maharashtra and Andhra Pradesh and the forecast say it will gain momentum in next few days. During the week under review, inflation of overall primary articles stood at 11.52 per cent, up from 10.87 per cent in the previous week. Primary articles have a weight of 20 per cent in the overall inflation basket.

However, inflation of non-food primary articles fell to 20.97 per cent from 21.31 per cent in the previous week.

"This (food inflation) is above the comfort level. Besides, commodity price fluctuations, particularly that of crude, continues to have an impact," Deloitte, Haskins & Sells Director Anis Chakravarty said.

While agreeing with the PMEAC chief's views on the monsoon, other experts pointed out that sustained high global commodity prices would put pressure on headline inflation, which has been above 8 per cent since January, 2010.

Headline inflation stood at 8.66 per cent in April. The RBI, in its monetary policy for 2011-12, had projected that overall inflation would average 9 per cent during the first half of this fiscal, before moderating to around 6 per cent by the end of the financial year.

It had cautioned about the high global commodity prices, mainly crude.

Rangarajan said he expects headline inflation to be around 6.5 per cent by March, 2012.

"Overall inflation will come down slowly by October-end. Once the monsoon picture becomes clear, I expect decline in prices. We could see WPI at 6.5 per cent by March-end," he said.

Commenting on the issue, Crisil Chief Economist D K Joshi said: "Global commodity prices are still running high and is likely to continue exerting pressure on the headline inflation numbers. We expect RBI to hike rates by 25 basis points on June 16." The apex bank has already hiked policy rates nine times since March, 2010, to curb demand and tame inflation.

"The April headline WPI numbers had shown manufacturing segment inflation at above 6 per cent. The main concern is from that and we expect the RBI to keep its focus on it and hike rates by 25 basis points," Stanchart's Chakraborty said.

He further added: "Weekly fluctuation in food inflation numbers is very common. However, the trend would depend a lot on the progress of the monsoon."

While prices of fruits, onions, protein-based items and cereals went up during the week under review, vegetables and pulses became cheaper. Pulses went down by 9.49 per cent year-on-year, while vegetables and potatoes became cheaper by 0.20 per cent and 2.87 per cent.

In the non-food segment, fibres became dearer by 56.56 per cent year-on-year, while minerals were up 12.11 per cent.

Fuel and power became more expensive by 12.46 per cent and petrol by 33.23 per cent on an annual basis during the week under review.

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.

Food inflation had fallen to an 18-month low of 7.47 per cent in the first week of May. However, the prospects for a prolonged moderation now seems to have vanished.

Monsoon to tone down inflation: PMEAC

Amidst concerns of rising food inflation, which again breached the 9 percent mark on Thursday, Prime Minister's top economic advisor C Rangarajan said prices will decline by the end of October after witnessing good monsoon.

"If monsoon is favourable, food prices will come down over the next 2-3 months. Overall inflation rate will come down slowly by October-end", Prime Minister's Economic Advisory Council (PMEAC) Chairman C Rangarajan said.

Rangarajan also exuded confidence that headline inflation would decline down to 6.5 per cent by March 2012 and that monsoon would lead to a decline in prices from the current
level of 8.66 per cent (April).

"Once monsoon picture becomes clear, I expect decline in prices. We could see WPI (wholesale price inflation) at 6.5 per cent by March-end," Rangarajan said.

Food inflation jumped to a two-month high of 9.01 per cent for the week ended May 28 on account of costlier fruits, onions and protein-based items.

The PMEAC, which proposes to come out with its Economic Outlook for 2011-12 next month, on Thursday held detailed  discussions with industry leaders during which the issue of
inflation figured prominently.

The industry representatives also expressed concerns over high interest rate and its impact on economic growth.

The other issues that came up for discussion include land acquisition laws, slow growth in exports in certain sectors like textile, infrastructure bottlenecks and other impediments threatening the industrial growth.

 

(Agencies)