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Food inflation may transmit to non-food items: Pranab Mukherjee

Food inflation declined from 17.81% in the last week of February, but still stood at high level of 16.3% in the first week of March.

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Food inflation may transmit to non-food items: Pranab Mukherjee
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Finance minister Pranab Mukherjee today said food inflation may spread to non-food items over a period, although food prices have started coming down.
    
"Though the food prices have started coming down, the concerted pressure of headline inflation arising from high food prices entails the risk of getting transmitted over time to other non-food items," Mukherjee said at the inaugural ceremony of Exim bank branch here.
    
Meanwhile, chief economic adviser Kaushik Basu said in Mumbai that inflation has slowly spread to non-food items from food items. He said, however, that it would begin to decline now and would be quite lower from May-end.
   
"Inflation has picked up little bit on non-food sectors, which was not the case earlier... We expect to see it going downward from March and (it will be) very low by end-May or June," he said.
    
Food inflation declined from 17.81% in the last week of February, but still stood at high level of 16.3% in the first week of March.
   
It has slowly spread to non-food items and analysts say that RBI recently raised its key short-term rates by 25 basis points each to prevent this spillover.
   
Overall, inflation rose to 9.89% in February from 8.56% in January.
   
Pointing out that the economy has started witnessing remarkable recovery, Mukherjee exuded confidence that the overall growth was expected to be over 7% this fiscal.
    
"Following the financial crisis, the GDP growth slowed down. However, economy has started witnessing remarkable recovery not only in terms of overall growth numbers," he said.
    
The finance minister said international trade sector has started improving and was visible in industrial growth, which has touched a healthy figure of 9.6% during the first ten months of this fiscal against 3.31% during corresponding period last fiscal.
    
Noting that major economies have started coming out of recessionary trend, Mukherjee said that the situation at the global level had improved more than expected because of governments' intervention and recent data suggest that rate of decline in economic activity was moderating.
    
Mukherjee said global trade had become a catalyst for the country's growth, with India managing to perform reasonably well.
Mukherjee said that though the fall in trade sector had been arrested, the recovery is still fragile since it was supported by stimulus packages.
     
He, however, said the outlook for India's external trade has brightened in 2010 with prospects of recovery in the economies and trade.
     
An analysis of month wise exports from India from 2008 onwards indicates a recovery in trade with export growth becoming positive in November 2009 over November 2008 at 18.2%, he said.
    
Stating that international trade sector has started improving, Mukherjee said that a reflection of this was visible in industrial growth, which has touched a healthy figure of 9.6% during April-January 2009-10 against 3.31% during corresponding period.
     
Mukherjee said iternational trade had become a catalyst for the country's growth.
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