Food inflation rises to two-month high of 9.01%

Notwithstanding the government's projections of a moderation in the rate of price rise of food items, food inflation jumped to a two-month high of 9.01% for the week ended May 28 on the back of costlier fruits, onions and protein-based items.

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

The latest numbers are the highest level of food inflation since the week ended March 26 when it had stood at at 9.18%. For the last two months, the rate of price rise of food items has been below the 8% mark.

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

During the week under review, milk prices were up by 8.49% and egg, meat and fish became dearer by 6.99%. Cereals also became costlier by 5.77% on an annual basis.

However, the prices of pulses went down by 9.49% year-on-year, while vegetables and potatoes became cheaper by 0.20% and 2.87%.

Inflation in overall primary articles, which have a weight of 20% in the headline WPI, was reported at 11.52% during the week under review, up from 10.87% in the previous week.

However, inflation of non-food primary articles fell to 20.97%, as against 21.31% in the previous week. This is likely to bring some cheer to the government and the Reserve Bank of India, who have termed inflationary pressure from the core (non-food) segment as the biggest threat to the economy in the near future.

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

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

The government and RBI had said that in the months to come, inflationary pressure would be more from core (non-food) items on account of high global prices of commodities, particularly crude.

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% in the first week of May. However, the prospects for a prolonged moderation now seems to have vanished.

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% during the first half of this fiscal.

The latest jump in food inflation numbers comes in the wake of a slew of bad news for the economy. GDP growth of the country slowed to a five-quarter low of 7.8% during the January-March quarter, while the six core industries registered meagre 5.2% expansion in April.

Experts had blamed inflation and the resultant rate hikes by the RBI, which resulted in slowing down of investment, for the poor economic growth numbers. The RBI is expected to go for another round of rate hikes at its mid-quarterly review next week.