Food inflation at 10.05%, highest in five months

Written by fe Bureau | New Delhi | Updated: Sep 2 2011, 07:14am hrs
To the chagrin of the government, the weekly food inflation entered double digits after a gap of five months, in a spurt mainly attributed to rise in prices of fruit and vegetable and protein-rich items.

According to the data released on Thursday by the ministry of commerce and industry, food inflation rose to 10.05% for the week ended August 20 from 9.8% reported in the previous week.

Terming the rise in food inflation graph as disturbing, finance minister Pranab Mukherjee stressed on improving the supply of food items. Inflation is always a matter of concern and we shall have to ensure and improve the supply of food items, he said.

This is the first time food inflation has touched the double-digit mark since the week ended March 12, when it was reported at the same level of 10.05%.

The official data say that prices of onion rose 57.01% in comparison to the same period last year, while that of potato increased 13.31% during the week under review. Fruit became dearer by 21.58% and vegetable by 15.78% on an annual basis.

The prices of egg, meat and fish were up 12.62%, while milk and cereal became dearer by 9.22% and 4.64%, respectively. However, pulses became cheaper by 4.16% and wheat by 2.52% in comparison to last year.

However, the Prime Ministers Economic Advisory Council (PMEAC) was confident in its outlook on the future trend in food inflation.

I expect food inflation to come down in the coming weeks... as the monsoon has been good. We are almost towards the end of the monsoon and all indications are that the agricultural production will be good during this year, said C Rangarajan, chairman, PMEAC.

Expressing concern on the rising graph of food inflation, Planning Commission deputy chairman Montek Singh Ahluwalia said seasonal factors had a role to play.

Experts also attribute the rise in prices of vegetable and fruit to the rise in procurement cost. Labour costs have gone up significantly during the last few years due to the governments social sector schemes such as the National Rural Employment Guarantee Scheme, which has pushed up the cost of procurement in case of milk, meat and fish products, said PK Joshi, senior programme coordinator, International Food Policy Research Institute.

FE had last week reported that with delays in kharif sowing due to scattered rainfall and rise in labour wages pushing up agricultural inputs cost, the retail prices of key vegetable, such as onion, potato, tomato and brinjal, have been looking northwards during the last two months in key metro cities.

Lack of enough cold storage facilities for perishables are also pushing prices up. According to an FE analysis of retail prices trend in key cities, prices of vegetable, besides food items such as milk, have risen more than 25% during the last two months.