Food inflation softens to 16.24% as supplies improve

New Delhi: Food inflation eased marginally to 16.24 per cent as of September 25 on improved supplies and declining prices of certain vegetables, especially potato. Food inflation fell 0.20 percentage points to 16.24 per cent during the week ended September 25, from 16.44 per cent in the previous week, government data showed.

Although the prices of potato fell by 50 per cent during the reporting week, some other essential items like cereals, milk and fruits became dearer.

Heavy rains in most parts of North India till mid-September had disrupted supplies of essential items during the month, pushing prices up and causing a demand-supply gap in the system.

“Food prices are expected to remain sticky for some time, as the demand supply imbalance continues. Although farm output is high when compared to last year, it is much lower from the peak production of the last five years,” Standard Chartered Bank Head of Regional Research Samiran Chakraborty said.

Food inflation was driven mainly by higher prices of pulses, rice and wheat. Data showed that on an annual basis, cereals prices have risen by 5.26 per cent.

While prices of pulses rose by 4.44 per cent on a yearly basis, wheat and rice became costlier by 6.49 per cent and 3.86 per cent, respectively.

Economists said with rain receding, supply pressures are easing which might have fanned inflation a little, but substantial decline will take time.

“No major drop in prices are expected. Inflation will moderate going forward but there would not be any major decline as supply pressures remain,” said an economist at a major private sector bank.

Among other food items, milk prices soared by 24.88 per cent during the week, compared to the same period last year, while fruit rates rose by 15.65 per cent.

Vegetables also became dearer by 7.65 per cent on an annual basis. Onion prices went up by 9.85 per cent year-on- year, but potato prices declined by 50.81 per cent.