Normal monsoon will help in stabilising food prices: PMEAC

Expressing hope that food inflation could come down to 6.5% by March, 2012, PEAC Chairman C Rangarajan today said normal monsoon would help in stabilising prices of food items.

"A fall in food inflation depends on the behaviour of the monsoon. If monsoon behaves normally, then it will create an environment in which prices will start coming down," he said.

Chairman of the Prime Minister's Economic Advisory Council (PMEAC) said food inflation is due to certain commodities only.

"But I do believe that food prices will come down...I believe that at the end of the fiscal, we should be able to get to 6.5 per cent," he said.

His comment came after the food inflation, snapping a two-week declining trend, rose to 8.31 per cent for the week ended July 2 on the back of soaring prices of protein-based items, cereals and vegetables.

The South-west monsoon has covered most of the country.

However, as per latest reports, monsoon rains were 19% below normal in the week to July 13.

More than 70% of agriculture in the country is dependent on monsoon.

The rate of price rise in food items stood at 7.61% in the previous week, ended June 25.

Fruits and milk became 13.54% and 12.39% costlier, respectively, during the week under review. Prices of protein-based items like eggs, meat and fish went up by 11.95% annually.

Food articles have a share of over 14% in the Wholesale Price Index (WPI).

Food inflation was in double-digit for most of 2010, before starting to moderate since March this year. Expensive food articles were the major contributor of high headline inflation last year.

However, in recent months, while food inflation has moderated the rate of price rise of fuel and manufactured items have gone up sustaining the inflationary pressure.

Headline inflation stood at 9.44% in June.

Both the RBI and other experts had also said that inflationary pressure during the next few months would be more from commodity prices, rather than on account of food items, as was the case in 2010.