India Food Inflation Eases to Slowest Pace Since February 2009 on Pulses
India’s food inflation decelerated to the slowest pace since February 2009 after prices of pulses, milk, meat and fish eased.
An index measuring wholesale prices of agricultural products gained 7.33 percent in the week ended July 16 from a year earlier, the commerce ministry said in a statement in New Delhi today. It rose 7.58 percent the previous week.
Food costs may rise, India’s central bank said this week after it raised interest rates for the 11th time since mid-March 2010. The possibility of deficient rains, higher prices offered by the government to procure farm products and inadequate egg and meat supplies could stoke inflation, the Reserve Bank of India said on July 26.
“The RBI will be watching food inflation closely to assess price pressures,” N.R. Bhanumurthy, a New Delhi-based economist at the National Institute for Public Finance and Policy, said before the report. “This is not the end of the rate-increase cycle.”
Governor Duvvuri Subbarao raised the central bank’s repurchase rate more than economists’ forecast, boosting it to 8 percent from 7.5 percent. He increased the Reserve Bank’s inflation forecast by 1 percentage point to 7 percent by March 31. India’s benchmark wholesale-price index rose 9.44 percent in June from a year earlier.
Prices of pulses fell 8 percent in the week ended July 16 from a year earlier, today’s report showed. The cost of milk rose 10 percent compared with a 10.8 percent gain the previous week, while eggs, meat and fish gained 6.4 percent from about 8 percent the week earlier.
“There are risks to the food inflation outlook,” the central bank said in its policy statement. “Although the monsoon has been close to normal so far, deficient rainfall in August coupled with higher minimum support prices could result in an upward movement in cereals and pulses price inflation.”
Prime Minister Manmohan Singh’s government last month raised the prices it pays farmers for rice and oilseeds to records to help spur planting. The federal government sets the crop prices to assure farmers’ incomes, while selling subsidized grains and cooking oils to the poor.
Monsoon rainfall, the main source of water for India’s 235 million farmers, may be less than forecast in July, Ajit Tyagi, director general of the India Meteorological Department, said today. Showers in August may be 94 percent of the long-period average, the weather office predicted in June.
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