Food inflation turns negative; drops to (-) 3.36 pc

Food inflation turns negative; drops to (-) 3.36 pc

Food inflation entered the negative zone at (-) 3.36 percent for the week ended 24th December 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 in New Delhi on Thursday.

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

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

Overall, vegetables became 50.22 percent cheaper during the week ended 24^th December.

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

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

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

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

Fuel and power inflation stood at 14.60 percent during the week ended 24^th December as against 14.37 percent in the previous week.

Headline inflation, which also factors in manufactured items, has been above the 9 percent-mark since December, 2010. It stood at 9.11 percent 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 percent by March, 2012.