Food inflation down at 10.35%

Food inflation declined by over a percentage point to 10.35 per cent during the week ended August 7 on cheaper vegetables, especially potato and onion, but the fall may not prompt the Reserve Bank of India to reverse its tight money policy stance at the next review on September 16.

Inflation in food items declined by 1.05 percentage points compared to 11.40 per cent in the previous week. It was 14.18 per cent a year ago and had crossed 20 per cent in December 2009.

"We will continue to see weekly fluctuations, ups and downs. Although the monsoon has been good, in certain agricultural areas like Satara in Maharashtra there have been supply disruptions due to floods," Axis Bank chief economist Saugata Bhattacharya said.

"However, we do not think the RBI is likely to go for any major policy change just due to the food inflation figure for a week. Factors like manufacturing output and WPI inflation will also factor in it," he added.

The Reserve Bank of India, which has been tightening the monetary policy to tame the rising prices, is scheduled to come out with its first mid-quarterly review on September 16.

Commenting on decline in food inflation, Crisil chief economist D K Joshi said, "while vegetable prices are down, wheat prices are up. This is part of the trend and the reason for fluctuation. However, we think the long term underlying trend is one of decline and it will get reflected well after the kharif harvest."

Food inflation data showed that vegetables become cheaper by 22.12 per cent, while the prices of potato and onion in the wholesale market declined by 49.81 per cent and 6.91 per cent respectively on yearly basis.

Having remained in single digit for two weeks, the food inflation climbed by again to 11.4 per cent during the week ended July 31.

It has remained in the double digit for most of the time since late last year when the government started bringing out separate figures for food inflation, which had shot up above 21 per cent in December 2010.

Analysts expect that food inflation will continue to fluctuate for some more time before showing declining trend on arrival of new crops.

The overall inflation, which include prices of manufactured goods besides food items, fell to single digit at 9.97 per cent in July, after a gap of five months.