High prices of milk, fruits hiked inflation: Montek

The Planning Commission said on Thursday food inflation was still high because of rising prices of milk, fruits and vegetables, despite dipping by nearly a percentage point to 15.53 per cent as of October 9.

Talking to reporters, Planning Commission Deputy Chairman Montek Singh Ahluwalia exuded confidence that food inflation would witness a much sharper decline in November.

"I think it (food inflation) is still high. I am glad that it has come down. When the (overall inflation) data for November will become available then. . . in case of food, you will see a much bigger decline," Ahluwalia said.

Food inflation in the previous reporting week was 16.37 per cent.

The Planning Commission Deputy Chairman said rise in rural income was leading to high consumption level, which was further pushing the food prices up.

However, prices of foodgrain are moderate, he added.

"If rural income would go up, more people will be buying vegetables, then their prices would go up.

"(Food) inflation is not up because of grain prices, they are moderate. It is up because of milk, fruit and vegetables."

Milk prices were up by 21.65 per cent during the week ended October 9 on year-on-year basis, while fruits and vegetables turned expensive by 15.65 per cent and 12.26 per cent, respectively.

However, cereal prices were up by just 5.88 per cent. Ahluwalia said one should not worry much, in case of vegetables prices being high if the overall inflation was down.

"When overall inflation moderates and within that if vegetable prices go up, we should not mind," he said.

Ahluwalia said food inflation would come down to single digit level soon, but refused to specify exact timeframe for it.

"I expect that food inflation would come down to single digit level," Ahluwalia said.

Some economists, however, said food inflation would be down to single digit number by December end.

"Supply disruptions are gradually fading, and this will help bring down food inflation. I expect food inflation to come down to single digit by December end," Crisil chief economist D K Joshi said.

Image: Montek Singh Ahluwalia