High base effect pulls down food inflation
Food inflation declined by a whopping 3.98 percentage points to 12.92 per cent for the third week of June, as the rate of price rise in cereals and vegetables showed a remarkable drop due to the high base effect.
However, a number of essential items like pulses, fruits and milk remained quite expensive for the week ended June 19.
The fall in food inflation would provide some breather to the government struggling hard to control prices of essential items which may again rise due to the cascading effect of the diesel price hike last week, say analysts.
The fall in food inflation was largely because of high base effect, which means that inflation was so high at this point of time last year that the rate of price rise now looks comparatively lower.
“The significant fall in food inflation is due to the (high) base effect,” Planning Commission principal advisor, Mr Pronab Sen, who retired as the chief statistician on Wednesday, said. Otherwise, most food items remained expensive, except for potatoes, onions, wheat and rice.
Because of the high base effect, cereal inflation came down to 5.36 per cent against 13.42 per cent a year ago, vegetables fell 1.17 per cent against 25.19 per cent. Within vegetables, potatoes turned cheaper by 39.61 per cent, while onion prices fell by 7.36 per cent.
Among cereals, rice inflation was 6.44 per cent against 17.22 per cent a year ago, and wheat stood at 4.49 per cent against 6.40 per cent. However, many commodities such as milk, fruits and pulses turned expensive during the week under review. Pulses rose by 31.57 per cent year-on-year despite some moderation on a weekly basis.
The latest data do not capture hike in prices of fuels, announced on June 25 and will be partly covered by the figures to be released next week. As such, prices of fuel items remained stagnant on a weekly basis.
In fact, the cascading effect of the diesel price hike will also push up food inflation. And economists do not expect food inflation to come to single-digit before September. Fuel inflation will go up, hiking the freight cost which in turn will put upward pressure on prices. — PTI
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