Food Inflation Drops To 7.78% For Week Ended June 18 2011

Food inflation was in double digits for the most of last year,before showing signs of moderation since March this year. However, it has again started going up since the second half of May. While January-March  economic growth stood at 7.8%, the lowest in five quarters, industrial output also slowed down to 6.3% in April. According to the data released by the Ministry of Commerce and Industry on June 30, food price index declined to 7.78% on annual basis during week ended June 18, from an annual rise of 9.13% recorded in the last week. However, the index for 'Food Articles' group, which has a weight of 14.34%, declined by 0.8 % to 189.8 (Provisional)  from 191.3 (Provisional)  for the last week due to lower prices of poultry chicken (4%), masur (3%), tea, condiments & spices and jowar (2% each) and arhar, mutton and fish-inland (1% each).  But, the prices of egg, gram, urad, ragi and fish-marine  (2% each) and wheat and barley (1% each) moved up.  The annual rate of inflation, calculated on point to point basis, stood at 11.84 percent (Provisional) for the week ended June 18 as compared to 12.62 percent (Provisional) for the previous week.

The index for primary articles group which has the highest weightage of 20.12% in WPI cooled to 11.84 percent for the week from 12.62 for the previous week.The index for 'Non-Food Articles' group eased to 17.91 percent from 18.43 percent for the previous week due to lower prices of flowers  and  raw  cotton  (3%  each),  cotton  seed  (2%)  and  raw  jute,soyabean  and raw silk (1% each). The index for Fuel & Power group which carries a weightage of 14.91%, rose to 12.98 percent for the week against  12.84  recorded  in the previous  week  due  to higher  prices  of aviation turbine fuel (3%), naphtha (2%) and furnace oil (1%).   On the other side Bank credit grew by around 20.9% to Rs 41 lakh crore and deposits increased by 17.7% to Rs 54.94 lakh crore, in the 12 month period ended June 17, 2011, the increased bank credit indicates the increase in the industrial activities. Bankers, however, say that there is an absence of demand for new projects and adequate liquidity is preventing them from raising interest rates despite the Reserve Bank of India's measures. As per the data released by the Reserve Bank of India, credit off-take during the period stood at Rs 41.23 lakh crore against Rs 34.10 lakh crore in the same period  of  the  previous  year.  Simultaneously,   outstanding   deposits reached to a record Rs 54.94 lakh crore, an increase of 17.7% from Rs 46.64 lakh crore in the corresponding period last year.

Meanwhile expressing concern over the fragile global economic environment,  Prime Minister Manmohan Singh said, it was possible to raise economic growth rate to 9-10% annually on the back of improved physical  and social  infrastructure.  While  interacting  with  a group  of editors, he said, "We are committed to a growth rate of 9 to 10 percent per annum. Our savings rate is about 34 to 35 percent of our GDP...with an investment rate of 36 to 37 percent (and) capital output ratio of 4:1, we can manage to have a growth rate of 9 percent".

The Prime Minister (PM), however, said raising economic growth rate to double digits would require strong commitment to improving infrastructure  and upgrading  education  and healthcare  facilities.  His assertion comes in the wake of the RBI lowering the economic growth projection to 8% for the current fiscal as against 8.5% achieved in 2010-11. Also The Free Trade Agreement (FTA) between India and Malaysia will come into effect from July 01 2011. This FTA will provide access to Indian professional  like accountants,  engineers  and doctors to the key South- East Asian nation. As per the official statement released by Ministry of commerce and industry on June 30, 'the Comprehensive Economic Cooperation   Agreement   (CECA)  envisage  liberalization   of  trade  in goods, trade in services, investments and other areas of economic cooperation.' This is the fourth FTA with key Asian country, before this India  has  also  entered   into  similar   agreement   with  South  Korea, Singapore and Japan, while FTA with Japan will come into effect from August.

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