Food inflation dips to 8.06%, but still in danger zone... | business | Hindustan Times
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Food inflation dips to 8.06%, but still in danger zone...

India’s food inflation fell to 8.06% for the week ended May 21, from 8.55% in the previous week, but experts cautioned it wasn’t time to open the bubbly yet as prices of non-food items were still at worrisome high levels.

business Updated: Jun 02, 2011 21:23 IST
HT Correspondent

India’s food inflation fell to 8.06% for the week ended May 21, from 8.55% in the previous week, but experts cautioned it wasn’t time to open the bubbly yet as prices of non-food items were still at worrisome high levels.

Inflation of non-food primary articles dropped to 21.31% during the week under review, as against 23.22% in the previous week. Food prices are also set to rise next month following a possible hike in prices of diesel and LPG that will pinch household budgets more, already pummelled by a bout of relentless rise in prices of most goods.

The average inflation in 2010-11 was 9.43% — the highest in 16 years.

The government expects the average annual inflation for 2011-12 to be between 7.5% and 8% amid spiralling prices in a slew of vital commodities such as oil.

The government expects inflation to moderate in the coming weeks.

“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,” finance minister Pranab Mukherjee said.

“It would be possible to have a moderate rate of inflation,” if the declining trend of non-food items continue.

High food and commodity prices are fanning prices of most manufactured goods.

Inflation of non-food articles has been in the range of 20-25% over the past many weeks.

Both the government and Reserve Bank of India (RBI) have acknowledged that underlying inflationary pressures have accentuated, even as risks to growth are emerging.

The central bank also raised the repo rate, the rate at which banks borrow from RBI, nine times in 13 months to 7.25% to cool prices.

A higher repo raises banks’ borrowing costs and prompting them to increase interest rate on final home, auto and corporate loans.