Inflation dips to minus 1.54%; food still dearer

Written by fe Bureau | New Delhi | Updated: Aug 1 2009, 05:28am hrs
Inflation tumbled to (-) 1.54% for the week ended July 18, as compared to (-) 1.17% in the previous week, but food prices continued to rise.

The wholesale-price index based inflation remained negative for the seventh consecutive week. However, it is widely expected to rise in the coming months.

Among primary articles, the food articles group inflation stood at 1.2% as food prices rose. Minerals group registered a major drop in prices with inflation at (-) 16.8%. Iron ore prices fell by 24% but manganese ore and vermiculite turned costlier by 77% and 86%, respectively. During the week, prices of food items such as mutton rose by 14%, arhar by 9%, gram by 4%, and fruit and vegetables by 2%. Imported edible oil prices also increased by 4%, while coconut oil, sugar, butter, ghee and gur were expensive by 1% each. At its review of the monetary policy on Tuesday, the RBI said negative inflation may not persist beyond a few more months. The central bank did not announce any rate cuts, in line with the expectations. Due to uncertain monsoon and rising global commodity prices, the RBI raised its inflation target to 5% by March, 2010 from 4%. We are expecting inflation to be around 7-7.25% by end-March, but mostly due to food issues, said Kotak Mahindra Bank chief economist Indranil Pan.

Concerns for inflation now come in the form of food items. Manufactured articles index is actually lower for this week. This could indicate that demand-driven inflation could take some time to take hold. Till that moment, RBI could stay on a pause mode, he said.

Cereal prices rose about 11%, pulses 16.9%, milk by 4.8% and spices by 5.4%. Sugar, khandsari and gur went up about 33.1% while processed fish turned dearer by more than 42.7% over last year.