Food inflation drops to 7.78% for week ended June 18

India’s food inflation after soaring to its two and half month’s high level in the last week has fallen to 7.78 % on annual basis for the week ended June 18. According to the official data, prices of vegetables, pulses and potatoes went down y-o-y in the week under review by 10%, 9.5% and 2.39% respectively. The latest fall in food inflation numbers almost by 1.35% is likely to come as a relief to the government, which had to deal with a series of bad news during recent weeks on the economic front. However, prices of other food items remained high during the week.

According to the data released by the Ministry of Commerce and Industry on June 30, food price index declined to 7.78% on annual basis during week ended June 18, from an annual rise of 9.13% recorded in the last week. However, the index for 'Food Articles' group, which has a weight of 14.34%, declined by 0.8 % to 189.8 (Provisional) from 191.3 (Provisional) for the last week due to lower prices of poultry chicken (4%), masur (3%), tea, condiments & spices and jowar (2% each) and arhar, mutton and fish-inland (1% each).  But, the prices of egg, gram, urad, ragi and fish-marine (2% each) and wheat and barley (1% each) moved up.

The index for 'Non-Food Articles' group, which has a weight of 4.26%, also registered a declined by 0.4% to 180.4 (Provisional) from 181.2 (Provisional) for the previous week due to lower prices of flowers and raw cotton (3% each), cotton seed (2%) and raw jute, soyabean and raw silk (1% each). However, the prices of gaur seed (9%), sunflower (7%), copra (3%), fodder (2%) and gingelly seed, groundnut seed, castor seed and niger seed (1% each) moved up.

The index for 'Minerals' group rose by 2.1% to 316.0 (Provisional) from 309.6  (Provisional) for the previous week due to higher prices of chromite (12%), magnesite (11%), copper ore (7%), barytes (6%), iron ore (5%) and steatite (2%). However, the prices of zinc concentrate (19%) and sillimanite (8%) declined. As a result, the broader 'primary articles' index, which has a weight of 20.12% in the overall wholesale price index (WPI) declined by 0.4 percent to 197.4 (Provisional) from 198.1 (Provisional) for the previous week.

The annual rate of inflation, calculated on point to point basis, stood at 11.84 percent (Provisional) for the week ended June 18 as compared to 12.62 percent (Provisional) for the previous week.

The index for 'fuel and power' with a weight of 14.91% in overall WPI, rose by 0.2% to 160.2 (Provisional) from 159.9 (Provisional) for the last week due to higher prices of aviation turbine fuel (3%), naphtha (2%) and furnace oil (1%).  However, the prices of bitumen (2%) declined. The annual rate of inflation, calculated on point to point basis, stood at 12.98% (Provisional) for the week ended June 18 as compared to 12.84% (Provisional) for the previous week.

Food inflation was in double digits for most of last year, before showing signs of moderation since March this year. However, it has again started going up since the second half of May. While January-March economic growth stood at 7.8%, the lowest in five quarters, industrial output also slowed down to 6.3% in April.

The moderation in food inflation has come in after Prime Minister Manmohan Singh said, inflation will come down to 6.5% by March-end if international oil prices soften and commodity prices do not rise further. However, on June 24, government has hiked the fuel prices, and increased prices of diesel, which is used as major input in agriculture and in transportation. The increase in prices of commodities as the transportation cost, which is likely to happen. Due to increased fuel prices, food inflation is expected to increase further in coming few weeks.