Food inflation plunges to six-year low of 0.42%

Food inflation fell sharply to a six-year low of 0.42 per cent in the week ended December 17 as prices of essential items like vegetables, onion, potato and wheat declined.

Food inflation, as measured by Wholesale Price Index, stood at 1.81 per cent in the previous week.

It was recorded at 15.48 per cent in the corresponding week of 2010.

According to official data released on Thursday, onions grew cheaper by 59.04 per cent year-on-year during the week under review, while potato prices were down by 33.76 per cent.

. . .

Prices of wheat also fell by 3.30 per cent.

Overall, vegetables became 36.02 per cent cheaper during the week ended December 17.

Experts feel the sharp fall in food inflation numbers, which was in double digits till the first week of November, comes as a big relief to both the government and the Reserve Bank of India, who have been battling high prices for over two years.

It will also be a major incentive for the RBI to look at the option of key interest rate cuts at its next quarterly monetary policy review in January.

. . .

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

Pulses became 14.07 per cent costlier during the week under review, while milk grew dearer by 11.30 per cent and eggs, meat and fish by 11.56 per cent.

Fruits also became 8.46 per cent more expensive on an annual basis, while cereal prices were up 2.15 per cent.

Inflation in the overall primary articles category stood at 2.70 per cent during the week ended December 17, as against 3.78 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 0.28 per cent during the week under review, as against 1.37 per cent in the week ended December 10.

Fuel and power inflation stood at 14.37 per cent during the week ended December 17, as against 15.24 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.