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'Food inflation will go back to 7 per cent in a few weeks'

Last updated on: January 6, 2012 11:57 IST

'Food inflation will go back to 7 per cent in a few weeks'

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Others may be gung-ho about food inflation falling into the negative territory, but not former chief statistician Pronab Sen.

The principal advisor in the Planning Commission tells Dilasha Seth that food inflation would again rise to seven per cent - and RBI should not hurry to cut rates.

Also, the effect of falling inflation in primary articles (found in raw form) could be felt on manufacturing product prices with a lag of four-five months. Excerpts:

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Image: Inflation to rise again.


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'Food inflation will go back to 7 per cent in a few weeks'

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Food inflation has fallen to (-) 3.36 per cent. Will deflation in food articles sustain?


The food inflation falling in the negative territory can be credited to both high base effect and seasonal factors.

But again, I feel the food inflation numbers that we are seeing is a short-term trend. 
Inflation in food articles will go up again, once the base effect wears away. Food inflation will go back to 7 per cent in a few weeks.

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Image: food inflation numbers that we are seeing is a short-term trend.
Photographs: Food inflation has fallen.
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'Food inflation will go back to 7 per cent in a few weeks'

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Many economists believe that overall inflation would come down to around 8 per cent in December. It has been over 9 per cent till November for the past one year. What is your assessment?

It is difficult to ascertain the headline inflation for December only by the food inflation numbers. There are other factors involved.

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Image: Difficult to ascertain the headline inflation for December.

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'Food inflation will go back to 7 per cent in a few weeks'

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Primary articles, which include food inflation as well, have been on a falling spree. Do you see it impacting inflation in manufactured products?

Primary articles inflation is on a decline. It has fallen to 0.10 per cent. However, its cost-pull effect on manufacturing comes with a lag of 4-5 months.

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Image: Primary articles inflation is on a decline.

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'Food inflation will go back to 7 per cent in a few weeks'

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While releasing PMI (purchasing manages' index) numbers for manufacturing and services for December, HSBC cautioned that demand is growing because of which companies are able to shift high input costs to customers. Do you agree?

Inflation in manufacturing is a major concern right now. However, PMI is not a good indicator for inflation. It is a good indicator for growth, but certainly not inflation.

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Image: Inflation in manufacturing is a major concern.

Tags: PMI , HSBC

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'Food inflation will go back to 7 per cent in a few weeks'

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<B>Do you believe that the Reserve Bank should go for rates cut and shift its focus on growth now? </B><BR>

RBI itself has gone on record saying that it won't go for a cut, if inflation is not under control.

And I agree with RBI, as until we have credible evidence that inflation in manufacturing products is on a decline, there is no real reason for the central bank to cut rates.

Like I said, as the base effect wears away in a few weeks, food inflation will be on a rise again. So we need to wait and watch more data.



Image: RBI itself has gone on record saying that it won't go for a cut, if inflation is not under control.


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