Food prices will stay high this year though the consumer price index slid below

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10 per cent to 9.6 per cent in February and the wholesale price index is close to zero levels, says a Citibank report.

Prices of essential food items such as rice, wheat, pulses, fruit and vegetables will come down from last year’s peak levels but remain above the levels in 2005 when the global economy was booming.

“There is no room for complacency as food prices could remain sticky,” said Rohini Malkani, economist at Citigroup India. This is because the agriculture sector is reeling under tighter credit that could hamper expansion of farm output and lead to low global stocks.

The Food and Agricultural Organisation has projected a decline in global production of cereals and a 27 per cent increase in food prices.

Kumar Gautam, associate fellow at the Centre for Trade and Development, said food prices would remain high for several reasons, most importantly the commodity traders. “The seasonal character of our agriculture is such that it gives a lot of space to speculative agents to play with prices that affect the consumers,” he said.

The report underscores the importance of the coming monsoon, beginning in July in India, in determining wholesale prices of commodities.

The Indian Meteorological Department’s first estimate of the monsoon is expected later this month. “The monsoon will play a vital role this season.

If any concerns emerge about the monsoon, the repercussions would be seen in prices, and we may see an extended rally in prices of agricultural commodities,” said Mehul Agrawal, commodities research analyst at Sharekhan.

The consumer price index, which covers 57 per cent of all food items, is expected to moderate by up to 6 per cent; the whole price index, constituting 14 per cent of food articles, is close to zero.

The recent Group of 20 summit vowed to channel resources through greater investment in long-term food security. According to the World Trade Organisation, prices of food and beverages have come down from last year’s peak.

Devinder Sharma, president of India’s Forum for Biotechnology and Food Security, said, “Food prices are going to be moderate this year, though a lot depends on seasonal variations. Looking at the present surplus production of rice and wheat, I believe the current year is going to be comfortable.”

Last year inflation went above 5 per cent, the desired level set by the Reserve Bank of India, and peaked at 12.91 per cent in August, one of the biggest contributors being food and fuel.

This forced the government to take measures such as increasing food procurement, banning export of some commodities, and suspending futures trading in soya oil, chana, rubber and potato.