Inflation down, food still costly

The annual Wholesale Price Index-based inflation dipped 60 basis points to a six-year low of 2.43 per cent. Food inflation, however, continued to hover around the double-digit levels, offering little respite despite the declining trend in the headline inflation.

While the dip has largely been driven by low fuel group inflation and slowing manufactured product inflation levels, the latest reported data show that year-on-year inflation in case of primary articles, led by mass consumption food items, continued to stay near double-digit levels. Besides, the sequential inflation in some of these items is also high; the week-on-week inflation in vegetables recorded an alarming 4 per cent.

According to the latest data, the WPI-based inflation rose 2.43 per cent for the week ended February 28, lower than the 3.03 per cent annual rise the previous week. Items such as cereals (11 per cent), pulses (13 per cent) and sugar (23 per cent) showed a year-on-year inflation well over the double digits. Besides, inflation levels in case of milk and fruits (both 7 per cent) and vegetables and spices (both 9 per cent) were within touching distance of the double-digit mark. On a sequential basis as well, inflation in the case of vegetables (4 per cent), fruits (1 per cent) and sugar (1 per cent) showed a surge during the latest reported week.

“There is no doubt that continuing food-based inflation is a worrying sign, though there’s been a bit of a declining trend. Also, food inflation tends to hit the poor the hardest,” an analyst said.

With food-based inflation continuing to stay high, the year-on-year inflation rate of primary articles was at 6 per cent; for manufactured products, it was at 4 per cent during the latest week. In ‘fuel and power’, inflation continued to decline at (-) 5.1 per cent vis-a-vis (-) 4.0 per cent dip last week, mainly on account of fall in non-administered oils.

Inflation in the overall food index (with a weight of 25.43 per cent in the index) declined marginally to 7.5 per cent the latest week, compared to 7.7 per cent last week, on account of fall in manufactured food products.

Even as food inflation stayed high, some analysts warn the drop in headline inflation has been too rapid. WPI-based inflation is “on track to turn negative in the next two or three months,” according to HSBC economist Mr Robert Prior-Wandesforde