Food inflation cools to 16.04 per cent, fuel prices unchanged

A normal monsoon, as forecast by the India Meteorological Department, may further help cool food prices.

However, fuel inflation remained unchanged at 12.69 per cent, as the effect of hike in duties on petrol and diesel translated into higher auto fuel prices -- a point of contention with the Opposition parties that demanded withdrawal of these measures.

Earlier this week, Finance Minister Pranab Mukherjee had expressed his inability to roll back the hike in duties on fuels saying fiscal conditions do not permit it now.

The 0.57 percentage points fall in food inflation during the week ended April 24, from 16.61 per cent a week earlier was mainly on account of easing pressure on prices with the arrival of rabi (winter) crops in the markets.

The figures of overall wholesale price based inflation for the month of April are expected next week, which may see a decline from the current level of 9.9 per cent.
Chief Economic Adviser Kaushik Basu today said overall inflation may decline to 6-7 per cent in next three months."I expect the overall WPI to come down to 6-7 per cent in the next three months," he said.

Even though food inflation has fallen for two straight weeks, it's still above 15 per cent -- a level it crossed in November last year.UN body ESCAP said enhanced level of food prices is a matter of concern, but expects inflation to cool down this year.

Over the week, inflation declined as prices of fish, wheat, fruits and vegetables fell by one per cent each. However, tea, gram and eggs became costlier. Tea prices rose 13 per cent while maize, gram and eggs prices were up 1 per cent each.On an annual basis, potatoes saw a significant fall of 32 per cent in prices on glut in supplies in various parts of the country and onions became cheaper by 26 per cent.

However, pulses remained expensive by about 31 per cent, milk by 21 per cent and fruits by over 14 per cent over the last year."Wheat harvest is good and the moderation in inflation is visible. The trend will continue as normal monsoon will increase production," Crisil principal economist D K Joshi said.

However, many believe that inflation is spreading to non -food manufactured items which may keep pressure on overall inflation. Last month, RBI tightened its monetary policy with a view to arresting food inflation from spreading to other sectors. 

But, overall inflation may still see a gradual decline due to food inflation cooling down.
"Rising prices of manufactured goods would be offset by the falling food prices. I think the WPI inflation is moderating at a slow pace and the April numbers will be marginally lower," Joshi said.

The Reserve Bank of India (RBI) in its annual monetary policy on April 20, raised the key inter-bank lending and borrowing rates and cash reserve ratio by 25 basis points each to tame inflation.RBI has projected inflation to come down to 5.5 per cent by end of this fiscal from 9.9 per cent in March, but also warned that volatile global commodity prices along with uncertain monsoon and demand pressures may jack it up.