Food inflation fell to Single Digit

Food inflation fell to single digit for the first time since May 2009 for the week ending 20 November 2010. Food prices for the week ended November 20 rose 8.6% falling sharply from 10.15% of the previous week. Important sources of protein such as eggs, meat & fish and pulses rose sequentially by 1.98% and 0.37%, respectively and vegetable prices showed a minor increase of 0.11%. The primary articles price index rose 12.72% compared with an annual rise of 13.38% a week earlier. Government had expected food inflation to dip in the third week of November 2010 as a result of improved supplies from the kharif crop. However a significant drop in prices has been noticed with respect to only rice and wheat.  The decline in food inflation to the lowest in 77 weeks resulted from favourable base effect or the sharp increase in food prices last year that has a lowering impact on current rate of rise in prices. Reserve Bank of India (RBI) that had in 2010 lifted interest rates six times is currently of the opinion that food inflation is largely a supply situation. It is possible therefore that it may not lift rates again in its 16 December 2010 review.