Food inflation at 7-week low; fuel price reason of concern: FM

New Delhi, July 7 (PTI) Cheaper pulses and vegetables
brought down food inflation to a seven-week low of 7.61 per
cent for the week ended June 25 though Indian Finance Minister
Pranab Mukherjee said inflationary pressure is likely to
continue following the recent increase in rates of petroleum
products.
While the inflation for non-food primary articles fell
during the period under review, a rise was noticed in the
fuel and power index on account of hike in prices of diesel,
cooking gas and kerosene announced last month.
Food inflation, as measured by the Wholesale Price Index
(WPI), stood at 7.78 per cent during the previous week. It was
almost 20 per cent during the comparable period of June, 2010.
During the week under review, pulses became over 9 per
cent cheaper year-on-year, while prices of vegetables and
potatoes also went down by 8.74 per cent and 2.13 per cent,
respectively.
"There is inflationary pressure in the system and these
weekly variations (in food inflation numbers) are mainly
because of base effect," Mukherjee said.
He further said the overall inflation in June could see
some upward movement, from 9.06 per cent recorded in May. It
would be mainly on account of the fuel price hike announced on
June 24, he added.
The latest numbers on price rise of food items are the
lowest since the week ended May 7, when food inflation stood
at 7.47 per cent.
Meanwhile, inflation in overall primary articles stood at
11.56 per cent for the week ended June 25, down from 11.84 per
cent in the previous week. Primary articles have a share of
over 20 per cent in the WPI basket.

Inflation of non-food items stood at 17.69 per cent, down
from 17.91 per cent in the previous week.
Prices of LPG went up by 14.58 per cent on an annual
basis. The inflation index for LPG was 11.31 per cent during
last few weeks.
On a weekly basis the index on fuel and power rose to
166.3 points from 160.2 points in the previous week. Overall
fuel and power inflation stood at 12.67 per cent.
"This six points increase in mainly because of
enhancement of prices of diesel, kerosene and LPG. That has
its impact," Mukherjee said.
While experts said the softening of price rise is likely
to continue as monsoon progresses, prices rise of fuel could
affect the overall trend.
They also said that the fuel price hike may spill over
into the food segment in the form of higher transportation
costs for grains and other crops.
"The recent increase in the price of diesel may result in
a further rise in vegetable prices in the coming weeks... The
fuel index rose by 4 per cent relative to the previous week,
reflecting the revision in prices of diesel, LPG and
kerosene," ICRA economist Aditi Nayar said.
She said a high base of nearly 20 per cent food inflation
in the corresponding period of last year has also contributed
to the moderation.
According to Nayar, headline inflation will rise to
around 9.7 per cent in June.

While pulses, vegetables and potatoes became cheaper on
an annual basis during the period under review, other food
items continued to be expensive.
Fruits became 22.75 per cent more expensive, while onions
became dearer by 21.24 per cent year-on-year.
Egg, meat and fish were up 10.12 per cent and cereals by
4.26 per cent. Milk rose by 12.10 per cent on an annual basis.
"In the light of high food stock and improved supplies,
food inflation has fallen... Good Monsoon rainfall should help
bring this down further in the coming weeks," Deloitte,
Haskins & Sells director Anis Chakravarty said.