Cheaper vegetables and pulses pulled down food inflation to a four-month low of 16.30

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per cent in the first week of March, but there are expectations that RBI may tighten money supply to prevent inflation from spreading to manufactured goods.

Food inflation came down by 1.51 percentage points from 17.81 per cent in the week before March 6, on account of decline in prices of vegetables, especially onions and potatoes, as per the Wholesale Price Index (WPI) of primary products.

Prices of onions fell 11.08 per cent in the wholesale market over the previous week and that of potatoes by 3.5 per cent. Overall vegetables prices during the same period dropped by 10.51 per cent, while pulses became cheaper by 3.85 per cent.

Food inflation had last touched a below-16 per cent level for the week ending November 15, 2009, when it had dropped to 15.58 per cent.

"Food prices are coming down. Sugar prices have come down due to higher production estimates in major producing states like Maharashtra and Uttar Pradesh," Agriculture and Food Minister Sharad Pawar told reporters.

Although food inflation is falling, Crisil's Principal Economist DK Joshi said the Reserve Bank of India may still raise key policy rates to rein in the general inflation that was at 9.89 per cent in February and likley to cross 10 per cent mark in March.

"I see overall inflation in March over 10 per cent. RBI in its April review is likely to raise key policy rates by 25 basis points," Joshi said.

Earlier, Finance Minister Pranab Mukherjee too had said that he would not be surprised if overall inflation reaches double digits this month.

RBI in its annual credit policy to be announced on April 20, will try to address the twin objectives of protecting growth and contain rising prices.

Though food prices are falling on a weekly basis, they are still high for most commodities except onion when compared to the corresponding period last year.

On annual basis fuel prices rose by 12.68 per cent, mainly on account of the increase in duties in the budget. Following the duty increase prices of petrol and diesel went up over Rs 2.50 a litre.

Milk was costlier by 15.31 per cent when compared with prices prevailing during the corresponding week in 2009.