Food inflation falls to 12.85 pct as on Oct. 23

India's annual wholesale price index (WPI) for food articles declined to 12.85 percent for the week ended October 23, 2010, according to a government release on Thursday.

Food inflation stood at 13.75 percent for the week ended 16th October, the government data showed.

The WPI for food articles group declined by 0.2 percent to 179.1 as compared to 179.5 for the previous week due to lower prices of arhar, urad, moong and poultry chicken, gram, maize, fruits and vegetables, condiments and spices; however, the index for fuel and power group remained the same. However, the prices of tea (7%), fish-inland (3%) and barley (2%) moved up.

The Reserve Bank of India (RBI) has decided to hike the repo rate by 25 basis points to 6.25 percent and reverse repo rate by 25 basis points to 5.25 percent on Tuesday. This is the sixth rate hike this year by the RBI.

The rate of inflation for the 52-week average inflation for the week ended October 23, 2010, was at 18.70 percent. The rate of inflation year on year basis marginally decreased to 12.85 percent from 12.87 percent against to the corresponding period.

The index for primary articles declined by 0.4 percent to 180.3 from 181.0 for the previous week.

The annual rate of inflation primary articles, calculated on point to point basis, stood at 15.43 percent for the week as compared to 16.62 percent for the previous week.

The index for 'non-food articles' group rose by 0.2 percent to 161.9 from161.6 for the previous week due to higher prices of raw jute (22%), raw rubber (3%), coir fibre (2%) and linseed (1%). However, the prices of groundnut seed (3%), castor seed, logs & timber and fodder (2% each) declined.

The index for 'minerals' group declined by 2.4 percent to 243.4 from 249.4 for the previous week due to lower prices of zinc concentrate (16%), iron ore (4 %) and copper ore (2%). However, the prices of barytes (5%), steatite (4%) and chromite (2%) moved up.

The index for fuel and power remained unchanged at its previous week's level of 148.3.

The annual rate of inflation fule and power, calculated on point to point basis, stood at 10.67 percent for the week as compared to 11.25 percent for the previous week.

RBI said this rate hike to contain inflation and anchor inflationary expectations, while being prepared to respond to any further build-up of inflationary pressures, to maintain an interest rate regime consistent with price, output and financial stability and to actively manage liquidity to ensure that it remains broadly in balance, with neither a surplus diluting monetary transmission nor a deficit choking off fund flows.

The headline inflation has moderated in recent months, the current rate of inflation is still well above the comfort zone of the Reserve Bank, said the RBI.