Food inflation at 8%, Rangarajan says govt needs to do more

New Delhi, June 2 (PTI) Cheaper vegetables and pulses led
to a marginal dip in food inflation at 8.06 per cent for the
week ended May 21, even as Prime Minister's economic advisor C
Rangarajan asked the government to take all the steps to lower
the overall inflation to the comfort zone of 4-5 per cent.
Food inflation, as measured by the Wholesale Price Index
(WPI) was recorded at 8.55 per cent in the previous week,
while it was over 21 per cent in the third week of May 2010.
The slight decline in inflation in case of non-food items
to 21.31 per cent, despite hike in petrol price last month,
prompted Finance Minister Pranab Mukherjee to express
confidence that the inflation would moderate further.
However, not satisfied with marginal decline in inflation
of primary goods, chairman of Prime Minister's Economic
Advisory Council (PMEAC) C Rangarajan said, "we must use all
policy instruments to bring down the current inflation and
re-anchor inflation expectations to the 4 percent to 5 percent
comfort zone".
For Mukherjee, dip in non-food inflation to 21.31 per
cent for the week ended May 21 from 23.22 per cent in the
previous week is significant. The inflation of non-food items
fell despite increase in petrol prices by over Rs 5 per litre
in the reporting week.
"...if the declining trend in food items and non-food
primary articles continues, then perhaps it will be possible
to have a moderate rate of inflation," he said.
Although prices of pulses, vegetables, wheat and potato
fell during the week, fruits and onion have continued to
remain expensive, putting pressure on households' budget.

Overall, inflation in primary articles rates stood at
10.87 per cent during the week under review as against 11.60
per cent in the previous week. Primary items have a weight of
over 20 per cent in the overall inflation basket.
As per the data released by the government on Thursday,
prices of pulses were down by 9.22 per cent year-on-year,
while wheat became cheaper by 0.77 per cent.
Besides, overall prices of vegetables were down by 1.06
per cent on an annual basis; potato became cheaper by 2.15 per
cent.
However, prices of other food items became more
expensive. Fruits were up by 30.51 per cent and onions by
12.32 per cent on annual basis.
Milk became dearer by 7.04 per cent and eggs, meat and
fish by 5.50 per cent. Cereal prices rose by 4.78 per cent,
while rice costs 2.51 per cent more.
In the non-food primary articles segment, fibres became
dearer by 55.82 per cent and minerals by 11.78 per cent.
Though high, the fibre prices rose at lower rate than the over
60 per cent jump reported during the previous week.
"The important figure is the non-food WPI. There is
practically a two percentage point decrease from 23.22 per
cent to 21.31 per cent (in it). My comment is that there will
be a moderation on inflation," Mukherjee added.
Experts, on the other hand, have warned against any undue
optimism and said inflationary pressure is likely to persist
in the near future.
"There will be pressure from crude prices. Besides, RBI
is likely to hike key policy rates further and that will cause
further slowdown in investments," Crisil chief economist D K
Joshi said.
The government and the Reserve Bank have said that in the
months to come, inflationary pressure would be more from core
(non-food) items on account of high global prices of
commodities, particularly crude.
The hike in domestic oil retail prices reflected in the
data. Petrol was up 32.41 per cent annually, after standing
consistent at 21.81 per cent during the previous few weeks.
Fuel and power index overall was up 12.54 per cent as
against a growth of 12.11 per cent in the previous week.
Meanwhile, the Headline inflation stood at 8.66 per cent
in April. The RBI, in its monetary policy for 2011-12, has
projected that overall inflation would average 9 per cent
during the first half of this fiscal.