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Prices remain high but India’s food inflation drops a tad

June 17, 2010

India’s annual food inflation fell slightly to 16.12 percent for the week ended June 5 from 16.55 percent for the week before even as prices of milk, lentils and some other commodities remained sharply costlier over a 52-week period.

The drop in the inflation rate was mainly because of a 1.1 percent decline sub-index for food articles over the week under review in the overall official wholesale price index, according to data released Thursday by the commerce and industry ministry.

In fact, the index for primary articles remained significantly higher at 16.86 percent as the sub-index for non-food items logged a relatively faster jump of 18.25 percent.

Following is the rise and fall in prices of some of the main commodities that form the sub-index for food articles over the past 52 weeks:

Cereals: 5.41

Rice: 6.76

Wheat: 3.97

Pulses: 34.40

Vegetables: (-)1.03

Potatoes: (-)34.96

Onions: (-)17.84

Fruits: (-)13.67

Milk: 21.12

Planning Commission Deputy Chairman Montek Singh Ahluwalia said Wednesday India’s annual food inflation may rise over the next few weeks because of the base effect of last fiscal but will fall eventually as the situation was within control.

“But there is no reason to worry. As you see the weeks go by, food inflation would come down again.”

Finance Minister Pranab Mukherjee had also expressed worry over rising food prices but said there were signs of easing off. “With the expectation of good monsoon and crop, I think moderating influence will be there from the middle of July onwards.”

Key policymakers admitted that inflation was getting broad-based, with a consensus emerging for the central bank to hike interest rates soon and not wait for the review of its monetary policy stance in July.

“I think the picture is clear. Inflationary pressures are stronger,” said C. Rangarajan, chairman of the Prime Minister’s Economic Advisory Council and a former governor of the central bank. “Some action will be called for by RBI in terms of policy tightening.”

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