Food inflation shoots up to 11.47% on costlier cereals, fruits

Food inflation shot up to 11.47% for the week ended August 28, the second consecutive week of upward thrust, even as Prime Minister Manmohan Singh expressed hope yesterday that prices will moderate in the coming months.

The rise in inflation was mainly on account of spurt in prices of cereals, fruits and milk. Food inflation was 10.86% for the week of August 21.

Experts said that food inflation will stabilise by next month when this year's fresh kharif crops starts arriving in the market.

"It (food inflation) will start coming down by October-November when the new harvest arrives," Crisil chief economist DK Joshi said. Minor ups and downs in the rate of food inflation are due to seasonality, he added.

"The week-to-week variation happens during the monsoon season. However, this year the rainfall has been plentiful and this will result in a good crop, thus bringing in more supplies," Joshi said.

Meanwhile, Prime Minister Manmohan Singh had expressed the hope yesterday that inflation will come down in the coming months. "Let us hope, it (inflation) will come down in the coming months. I am not an astrologer," he had said.

In July, Singh had told the National Development Council meeting that overall inflation would come down to around 6% by December this year.

On annual basis, cereals turned expensive by 5.07% for the week ended August 28. Within this group, prices of pulses soared by 13.44%, while rice and wheat increased by 4.74% and 7.04%, respectively.

Among other food items, milk prices soared by 17.60% during the week compared to the same period last year, while that of fruits went up by 10.34%.

However, vegetable prices went down substantially during the week under review. Compared to last year, vegetables were cheaper by 9.38%. Within vegetables, potato was cheaper by 50.44%, while onion went down by 10.32% on an annual basis.

"The new harvest is not yet in, while stockpiles of many items from the last harvest is getting over. Besides, overall demand is also up," senior economist and former director of Indian Council of Research in International Economic Relations (ICRIER) Rajiv Kumar said. Heavy rainfall in some regions has disrupted transportation and hampered supplies, he added.

"However, the fresh crop is on way and soon we may see food prices stabilise," Kumar said.

Overall inflation based on wholesale prices, had declined to single digit in July at 9.97%, after being in double digit for five months. August's inflation figures are expected next week.