Food inflation turns negative; -3.36% on December 24 year-on-year

Food inflation turned negative in the year to Dec. 24, at -3.36 per cent, while fuel inflation accelerated to 14.6 per cent, government data on Thursday showed.

In the previous week, annual food and fuel inflation stood at 0.42 per cent and 14.37per cent, respectively.

The primary articles price index was up 0.10 per cent, compared with an annual rise of 2.70 per cent a week earlier.

Headline inflation has stayed above 9 per cent for a year, despite 13 rate increases by the central bank since March 2010.

"If this trend continues then you will have (fiscal) year-end (headline) inflation around 6%," Mukherjee told reporters.

Food articles have a 14% weight in the wholesale price index (WPI), the most widely followed measure of inflation in the country.

The moderation in food and fuel inflation should help the stubbornly high headline inflation-which has stayed above 9% for a year-decline in December. The annual rate of inflation was 9.11% in November.

The RBI paused its interest rate increases in its December 16 policy review and indicated its willingness to ease monetary policy if inflation moderates.

"This is a very good sign and shows that the decline is consistent," said Bank of Baroda chief economist Rupa Rege Nitsure. "However, we'll have to wait and watch how headline inflation will perform, given the pressures from imported inflation on manufactured goods," she added.

Food inflation started falling from mid November, driven primarily by a sharp fall in inflation in vegetables. The rate of decline speeded up early this month, triggered by a sharp seasonal drop in prices and a strong statistical base effect of high inflation last year.

The recent drop in food inflation and easing in overall inflationary pressure may prompt the central bank to cut interest rates.

The Reserve Bank of India last month kept policy rates unchanged after hiking the key rates 13 times since the beginning of 2010.

The headline inflation based on the wholesale price index was recorded at 9.11 percent in November, according to the latest available data.

The following are the yearly rise and fall in prices in the week under review of some main commodities that form the sub-index for food articles:

Onions: (-) 73.74 percent
Vegetables: (-) 50.22 percent
Fruits: 10.87 percent
Potatoes: (-) 34.01 percent
Eggs, meat, fish: 13.82 percent
Cereals: 1.97 percent
Rice: 1.46 percent
Wheat: (-) 3.41 percent
Pulses: 13.85 percent

Source: http://www.economictimes.com/

Thanks,
Gaurav Agarwal
Head Dealer
DENIP Consultants Pvt Ltd