Food inflation slips a bit, but fuel hike a big worry

09:03 AM Jun 02, 2019 |


Cheaper vegetables and pulses led to a marginal dip in food inflation at 8.06 per cent for the week ended May 21, prompting Finance Minister Pranab

Mukherjee to express confidence that inflation would moderate further.


Food inflation, as measured by the Wholesale Price Index ( WPI) was recorded at 8.55 per cent in the previous week, while it was over 21 per cent in the third week of May 2010.


However the fall in inflation may be short- lived because of the impending fuel price hike.

Goading the government to decide fast on freeing diesel prices to contain subsidy burden, Prime Ministeralt39s Economic Advisory Council ( PMEAC) Chairman C Rangarajan said, " I think the need to take corrective action with regard to petroleum prices has become urgent… We need to contain the fiscal deficit at 4.6 per cent of GDP ( gross domestic product) during the year for a variety of reasons," he told reporters on the sidelines of the 26th Skoch Summit.

Some action, he said, is called for in the petroleum sector to contain subsidies at the budgeted level. On the likely timing of deregulation of diesel prices, Rangarajan said, " I think soon… it will be done". Non- food inflation fell to 21.31% for the week ended May 21 from 23.22% despite the hike in petrol prices by over Rs 5 per litre in the reporting week.

During the reporting week, milk became dearer by 7.04 per cent and eggs, meat and fish by 5.50 per cent. Cereal prices rose by 4.78 per cent, while rice costs 2.51 per cent more.

In the non- food primary articles segment, fibres became dearer by 55.82 per cent and minerals by 11.78 per cent.

Though high, the fibre prices rose at lower rate than the over 60 per cent jump reported during the previous week.

Too early to cheer?

Experts warned against any undue optimism and said inflationary pressure is likely to persist in the near future.

" There will be pressure from crude prices. Besides, RBI is likely to hike key policy rates further and that will cause further slowdown in investments," Crisil chief economist D K Joshi said.

Although the government has deregulated petrol, giving freedom to oil marketing companies ( OMCs) to fix prices, it has refrained from taking any decision regarding diesel prices.

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