KARACHI, Feb 22: The State Bank said on Thursday the food inflation still dominated the main inflation basket and its contribution in January, 2007 was 53.8 per cent, which was much higher than the January 2006.

The sharp reduction in food prices for the first time in the current fiscal substantially decreased the food inflation in January but the SBP’s “Inflation Monitor” issued on Thursday pointed out that the food contribution in the basket of CPI was alarmingly high compared to 38.5 per cent in January last year.

Food inflation decreased from 12.7 per cent in December, 2006 to 8.7pc (year-on-year) in January 2007, driven mainly by decrease in prices of vegetables, including onion, potatoes and tomatoes.

Both the food and house rents directly affect majority of people and both of them were on higher side.

The SBP reported that of the total 124 commodities included in the food group, 46 commodities, including fresh milk, beef, pulse gram, vegetable ghee, sugar refined and some fruits exhibited inflation in the range of 10 to 60 per cent in January 2007.

The report shows that the main food items, which are of daily consumption, were at the very high side of inflation, which reached up to 60 per cent.

“The combined weight of commodities with double digit inflation is about 54 per cent of the food group,” said the Inflation monitor.

It has been a source of concern for the people that the food basket does not reflect the true impact of the food price hike and the SBP’s detail report shows their concern is true.

“Among the key food items, average prices of wheat flour, fresh milk, beef, sugar and vegetable ghee increased,” said the report.

The report further said inflation of 18 commodities like tomatoes, potatoes, green chilies, apple, ginger, and peas either declined or remained the same during the month. The rest of items, having a weight of 31 per cent in food group, exhibited subdued or moderate inflation.

House rent Index recorded an increase of 6.2 per cent in January compared to 9.9 per cent in the corresponding month of 2006.

Other indices of non-food group exhibited increase in inflation during the month, which included apparel, textile, footwear, household furniture and equipment and cleaning, laundry and personal appearance.

The medicare sub-index registered a significant increase of 9.9pc in the month under review compared to 2.4 per cent growth in the same month last year.