Food inflation falls to 7.58%, lowest since March 2009

Food inflation fell to 7.58% in the week ended July 9, down from the previous week's 8.31%. The decline, the sharpest in last 28 months, prompted finance minister Pranab Mukherjee to comment that if the trend continues, it could soften overall prices. Food items contribute 14% to headline inflation.

During the week, pulse prices were down 7.67% from the same week in 2010. Prices of other food items, though, continued to rise.

Year-on-year, onion prices rose 19.68%, fruits 15.84%, milk 10.76% and eggs, meat and fish 8%. Prices of cereals and vegetables rose 4.77% and 4.31%, respectively.

Inflation of primary articles stood at 11.13% during the week, down from 11.58% in the previous week. Primary articles have a share of over 20% in the wholesale price index.

During the last four reporting weeks, food inflation fell from 9.13% to 7.61% before rising to 8.31%. Analysts have expressed concern about the fluctuations in food inflation.

Ramesh Chand, director, National Centre for Agricultural Economics and Policy Research, told FE that fluctuating prices will make it difficult for the government to keep the food inflation graph down.

Falling food inflation offers some relief for the government which has faced criticism for the price rise. On Wednesday, the finance minister had expressed hope that inflation could come down to 6-7% by the end of the financial year in March.

On Thursday, he called the trend "encouraging", adding that factors beyond the government's control could have some adverse impact.

As FE recently reported, comfortable stocks and less-than harsh summer months moderated prices of rice, wheat, potato, onion and tomato across major cities. Usually, supply constraints push up prices during summer months.

In the last two months, prices of all these commodities have been stable in key cities, with tomato prices falling to a record low. However, rising prices of milk and fruits have steadily pushed up food inflation repeatedly in the last few weeks.

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