Food inflation declines to 8.06%

Food inflation fell marginally to 8.06% during the week ended May 21, but the rate of price rise of non-food items continued to remain above 20%, driven mainly by the increase in price of petrol last month.

The government 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% during the week under review from 8.55% in the previous week, non-food primary articles registered inflation of 21.31%, as against 23.22%.

Inflation of fuel items, however, increased to 12.54% from 21.11% in the previous week, mainly on account of an over 32% 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% to 21.31% 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% during the week under review as against 11.60% in the previous week.

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

Global crude prices are currently above $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% year-on-year, while wheat became cheaper by 0.77%.

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% on an annual basis, while potatoes became cheaper by 2.15%.

However, prices of other food items became more expensive. Fruits were up by 30.51% and onions by 12.32% year-on-year.