Food inflation declines to 10.3% | business | Hindustan Times
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Food inflation declines to 10.3%

business Updated: Nov 18, 2010 15:57 IST

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Food inflation fell by two percentage points to a three-month low of 10.30 per cent in the first week of November on the back of increased supplies following the end of the rainy season, fuelling hopes the rate of price rise will moderate to a single digit shortly.

This is the fifth week in a row that food inflation has fallen on the back of enhanced crop arrivals in markets across the country as supply disruptions caused by heavy rains ended.

It is also the first time after a long gap that food inflation has been lower during a particular period than the corresponding period of the previous year.

Food inflation stood at 13.99 per cent for the corresponding period last year. In fact, the large base last year was another factor that made food inflation for the week ended November 6 seem lower.

"(Generally) You can't have 13 per cent inflation over 13 per cent inflation (last year)," Crisil Chief Economist D K Joshi said.

Single-digit food inflation was last witnessed in the week ended July 24 this year and analysts believe that it will fall below 10 per cent again shortly.

Declining food inflation may also lead to a fall in overall inflation, which the government expects to come down to 6 per cent by the end of the year from 8.58 per cent in October.

This, along with 16-month-low industrial growth of 4.4 per cent in September, may prompt the RBI to ease its monetary tightening stance.

However, Joshi said the RBI may look at other data as well before deciding on the issue, though the probability of a another hike in policy rates at its December 16 policy review is low.

The other parameters that may be taken into consideration by the central bank include the prices of protein-based items, which remained at elevated levels.

Furthermore, global oil and commodity prices might also fuel inflation. The exact impact of quantitative easing steps announced by the United States remain to be seen, Joshi added.

The price of most food items declined during the week on improved availability after the end of the monsoon. Even onions, which have become quite expensive due to crop damage in the major producing state of Maharashtra, rose by just 0.63 per cent during the week under review.

Not a single food item saw a price rise of over 1 per cent during the week. On a yearly basis, however, the price of protein-based food items became significantly costlier.

While the price of eggs, meat and fish rose by over 33 per cent, milk prices jumped by more than 25 per cent and pulses rates shot up by 19.4 per cent.