Food inflation slows, rates steady
India’s food inflation rate slackened in mid-May, after picking up pace for two weeks, giving the Reserve Bank more leeway to hold rates until its July review and gauge the impact of euro zone debt woes on the domestic economy.
The food price index rose to 16.23 per cent in the year to May 15, government data showed, lower than the previous week’s annual reading of 16.49 per cent as the fruits and vegetables declined marginally.
A forecast of normal June-September monsoon, vital for farm output and rural incomes, should calm inflation fears. “If there is a normal monsoon, and as base effect plays its role, I see food inflation coming down to single-digit by July-August,” said Mr N.R. Bhanumurthy, an economist with the National Institute of Public Finance and Policy.
“However, if the government decides to raise the procurement price of agricultural commodities in a big way, it can lead to second round of food inflation,” he said. The fuel price index rose by 12.08 per cent, while the primary articles index was up 15.90 per cent.
Analysts say if the government decides to raise petrol and diesel prices, it would have a cascading effect on food prices as well.
— Reuters
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