Food Inflation eases to 8.06% for the week ended May 21

India's food Inflation after soaring to its four week's high level in the previous week has eased considerably to 8.06% on annual basis during week-ended May 21, 2011 on the back of cheaper pulses, wheat and some vegetables, the latest numbers are likely to be seen by the government as a silver lining after the slowdown in economic growth during the first quarter.

According to the data released by the ministry of commerce and industry on Thursday, food price index declined to 8.06% on annual basis during week-ended May 21, from an annual rise of 8.55% recorded in the previous week. Meanwhile, the index of 'Food Articles' declined by 0.2% to 186.3 (Provisional) from 186.7 (Provisional) during the previous week due to lower prices of poultry chicken (7%), barley (3%), fish-marine and maize (2% each) and arhar, urad, egg and fruits & vegetables (1% each).  However, the prices of bajra (3%), gram (2%) and milk, jowar and ragi (1% each) moved up.

The index for 'non-food articles' group declined by 0.1% to 183.3 compared with 185.2 for the previous week due to lower prices of logs and timber (34%), raw silk (7%), gingelly seed and gaur seed (5% each), raw rubber (3%), mesta (2%) and fodder, raw jute, sunflower and niger seed (1% each).  However, the prices of rape and mustard seed (3%), soyabean (2%) and castor seed (1%) moved up. As a result, the broader 'primary articles' index, which has a weight of 20.12% in the overall wholesale price index (WPI) declined by 0.4% to 191.7 from 192.4 seen in the previous week. The annual rate of inflation, calculated on point to point basis, for this group stood at 10.87% for the week ended May 21 as compared with 11.60% in the previous week.

The index for 'fuel and power' with a weight of 14.91% in overall WPI rose by 0.4% to 160.7 from 160.1 for the previous week due to higher prices of petrol (9%) and bitumen (4%).  However, the prices of aviation turbine fuel (3%), naphtha (2%) and light diesel oil (1%) declined. The annual rate of inflation for this group, calculated on point to point basis, stood at 12.54% (Provisional) for the week ended May 21, 2011 as compared to 12.11% for the previous week.

Though, the weekly food inflation has slowed much from the double-digit rise for much of 2010 and also compared to week-ended May 14, 2011, but headline inflation at 8.66% in April remains considerably above the central bank's comfort level, thereby maintaining pressure on the apex bank to continue with its monetary policy stance in its upcoming monetary policy review on June 16, 2011. However, the slower than expected growth of the economy too might not be overlooked by the Central bank while reviewing its monetary policy stance as the economy grew 7.8% in the January-March quarter- its slowest pace in five quarters in the three months to March as rising interest rates crimped consumption and investment.