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Food inflation turns negative; drops to -3.36 pc

Press Trust of India
Jan 05, 2012 at 12:58pm IST

New Delhi: Food inflation entered the negative zone at (-) 3.36 per cent for the week ended December 24 as prices of essential items like vegetables, onion, potato and wheat declined.

"There has been substantial improvement. Food inflation has turned negative for the first time in recent memory," Finance Minister Pranab Mukherjee told reporters here.

This is the first time in almost six years, for which data with base year 2004-05 is available, that food inflation has shown a decline on an annual basis.

Food inflation turns negative; drops to -3.36 pc

This is the first time in almost six years that food inflation has shown a decline on an annual basis.

Food inflation, as measured by Wholesale Price Index (WPI), stood at 0.42 per cent in the previous week. It was almost 21 per cent in the corresponding week of 2010.

According to the official data released today, onion became cheaper by 73.74 per cent year-on-year during the week under review, while potato prices were down by 34.01 per cent. Prices of wheat also fell by 3.41 per cent.

Overall, vegetables became 50.22 per cent cheaper during the week ended December 24.

The fall in the rate of price rise of food items has been substantial since the first week of November, when it stood at double-digit.

Experts feel that the decline in food inflation will be a major incentive for the Reserve Bank to look at the option of key interest rate cuts at its next quarterly monetary policy review later this month.

However, other food products became more expensive on an annual basis, led by protein-based items.

Pulses were 13.85 per cent costlier during the week under review, while milk turned dearer by 9.49 per cent. Eggs, meat and fish prices were up 13.82 per cent year-on-year.

Fruits also became 10.87 per cent more expensive on an annual basis, while cereal prices were up 1.97 per cent.

Inflation in the overall primary articles category stood at 0.10 per cent during the week ended December 24, as against 2.70 per cent in the previous week. Primary articles have over 20 per cent weight in the wholesale price index.

Inflation in the non-food segment, which includes fibres and oilseeds, was recorded at 0.85 per cent during the week under review, as against 0.28 per cent in the week ended December 17.

Fuel and power inflation stood at 14.60 per cent during the week ended December 24, as against 14.37 per cent in the previous week.

Headline inflation, which also factors in manufactured items, has been above the 9 per cent-mark since December, 2010. It stood at 9.11 per cent in November this year.

The RBI has hiked interest rates 13 times since March, 2010, to tame demand and curb inflation.

In its second quarterly review of the monetary policy last month, the central bank had said it expects inflation to remain elevated till December on account of the demand-supply mismatch before moderating to 7 per cent by March, 2012.

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