Food inflation dropped to the single-digit level of 9.67 per cent for the week

RELATED ARTICLES Low growth will moderate inflation, lead to rate cut: Fitch Inflation still sticky in manufacturing sector: Pranab Inflation remains a concern: RBI Inflation risks persist; likely to be 7% by March end: RBI Lower inflation to give RBI leeway for relaxing tight policy

ended July 17 for the first time this financial year following a sharp year-on-year decline in the prices of potatoes, onions and other vegetables.

Economists and industry, however, do not foresee any immediate prospects of the general inflation for all commodities coming down.

The data for all-commodities wholesale price index are due for release next on August 14 and economists said July inflation could in fact be higher than 10.5 per cent in June. This is because fuel prices were hiked on June 25 and its impact will be fully registered in the price index from July onwards.

Higher industrial input costs, which have caused inflation in manufactured products, have not yet shown any sign of a decline. Non-food and non-fuel “core inflation”, according to the Reserve Bank of India, is raging above 8 per cent.

The fall in food inflation wouldn’t necessarily lead to a decline in the prices of manufactured products, Dabur India’s group director, PD Narang, said.

Eatery chain Nirula’s chief executive officer Samir Kuckreja said, “The food inflation rate has fallen only by a small margin. It wouldn’t make any difference to our prices.”

The decline in food inflation for the week ended July 17 was also partly on account of the “base effect” -- in the comparable week a year ago, food prices were high. The index for the food articles group in fact rose by 0.6 per cent to 299.3 for the week ended July 17 from 297.6 in the previous week.

The Kassa group economist, Siddharth Shankar, said the numbers released on Thursday were clear indication that there was no respite yet from inflation. “Since money supply in the system still remains high, inflation will continue to remain high”, he said.

Yes Bank’s chief economist Shubhada Rao said the drop in food inflation was due to the high base last year. The index, as seen from week to week, is still on the rise.

Crisil’s chief economist DK Joshi said food prices were coming down faster than expected due to better crop prospects. Since the next kharif crop will be rice and pulses, the prices of the two commodities have begun cooling.

On a year-on-year basis, potatoes became cheaper by more than 46 per cent and onions by 10 per cent in the week ended July 17. Overall vegetable prices fell 14.77 per cent.

Inflation in pulses remained stable at 21.23 per cent, compared with 21.25 per cent in the same week a year ago. Inflation in wheat was higher at 6.27 per cent, compared with 2.51 per cent in the same week last year. Inflation in rice was lower at 5.31 per cent, compared with 16.83 per cent a year ago. However, the prices of pulses, milk and fruits rose by 21.23 per cent, 19.03 per cent and 12.14 per cent, respectively, in the past one year.