Food inflation falls to 12.9%, sharpest drop in 8 months

In its sharpest drop in eight months, food inflation stood at 12.92 per cent in the week ended June 19 from a year ago. But the dip is statistical and unlikely to make food items any cheaper, economists said. Zia Haq reports.

In its sharpest drop in eight months, food inflation stood at 12.92 per cent in the week ended June 19 from a year ago. But the dip is statistical and unlikely to make food items any cheaper, economists said.

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The figure for the previous week was 16.90 per cent.

The wholesale food price index showed up as falling when compared to the corresponding week last year, which was 12.57 per cent. This "low base effect" caused food inflation to fall.

"Actual prices won't come down because food inflation has a large permanent component, like higher base prices and production costs," said NR Bhanumurthy, an economist with the state-owned National Institute of Public Finance and Policy.

The outlook for food prices still remains hinged on the monsoon, predicted to be normal.

Last Friday's hike in fuel prices will also begin transferring to food items through higher freight charges in about two months, said D.K. Joshi, chief economist at Crisil Ltd, the Indian arm of Standard & Poors.

However, overall food inflation is showing a stabilising trend. This means food remains expensive, but prices aren't rising any further.

But there is still sustained pressure on food prices, Bhanumurthy added.