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Food inflation to ease next month: Montek

business Updated: Jan 04, 2010 14:47 IST

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The Planning Commission on Monday said that food inflation will come down next month from a more than a decade's high of around 20 per cent, as apprehensions about adverse effect of drought were easing.

"I think this fear of negative impact of drought being reduced, there will be a softening in food price inflation in the next month," Planning Commission Deputy Chairman Montek Singh Ahluwalia told reporters on the sidelines of a FICCI function in New Delhi.

He further said that inflation at the moment was not caused by excess money supply but was dominantly on account of surge in food prices.

While refusing to speculate on what needs to be done to curb inflation, he said, "When inflation begins to go up, one of the instruments that people use is monetary instrument."

RBI is scheduled to review its monetary policy stance later this month and has dropped hints of tightening money supply. Ahluwalia, however, said that it is a complex issue as the policy makers have to deal with only one set of price rise (food).

Following widespread drought and floods in various parts of the country, food inflation climbed to more than a 10-year high of 19.95 per cent in December, driven mainly by higher prices of potato, other vegetables and pulses.

According to latest figures, food inflation stood at 19.83 per cent during the third week of December.