Food inflation dips to 0.42 percent

New Delhi: Due to sharp decline in the prices of onions, potatoes and vegetables, India's annual food inflation dropped sharply to 0.42 percent for the week ended Dec 17, as compared to 1.81 percent in the previous week and 15.48 percent in the corresponding week of last year, official data showed Thursday.

This is the lowest level of food inflation in over six years. After remaining stubbornly near double-digit for almost two years, food inflation has dropped sharply in the last one-and-a-half months giving much needed relief to the common people and policy makers.

Onion prices are less than half when compared to their price during the corresponding period of last year. Onions have become cheaper by 59.04 percent year-on-year.

Vegetables are cheaper by 36.02 percent, while potato prices have declined by 33.76 percent year-on-year.

The sharp decline in the prices of onions and vegetables and overall food inflation is partly due to high base effect. Last year, there was sharp increase in the prices of onions and vegetables. Onion prices had risen by 58.54 percent and vegetables by 36.29 percent year-on-year for the week ended Dec 17, 2010.

Food inflation came down to single-digit in the second week of November and has dropped consistently since then. It was recorded at 10.63 percent for the week ended Nov 5.

Inflation in overall primary article, which has 20.12 percent weight in the wholesale price index, dropped to 2.70 percent for the week ended Dec 17 as compared to 3.78 percent in the previous week, according to data released by the ministry of commerce and industry.

Fuel and power inflation dropped to 14.37 percent during the week under review as compared to 15.24 percent in the previous week.

Despite the recent moderation in food inflation, overall inflation continue to remain elevated. The headline inflation based on the wholesale price index was recorded at 9.11 percent in November, according to the latest available data.

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

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: (-) 59.04 percent

Vegetables: (-) 36.02 percent

Fruits: 8.46 percent

Potatoes: (-) 33.76 percent

Eggs, meat, fish: 11.56 percent

Cereals: 2.15 percent

Rice: 1.82 percent

Wheat: (-) 3.30 percent

Pulses: 14.07 percent

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