India’s food inflation rate contracted to -2.90% during the week ended December 31, marginally higher than the previous week’s -3.36% as fresh arrival of seasonal vegetables bolstered supplies and pushed down prices.
A combination of high base last year — food inflation stood at 20.84% during the corresponding week last year — and arrival of fresh crop of seasonal vegetables has helped magnify the fall in prices.
Onion prices crashed by 75% during the week compared to last year when the vegetable’s price had skyrocketed to record levels as speculative hoarding and unseasonal rains damaged crops, crunching supplies.
Prices of potatoes and other vegetables also dropped sharply during the week compared to last year bringing down overall food inflation, although protein-rich items such as pulses, milk, egg, meat and fish continued to grow at a fast pace.
Finance minister Pranab said that he was “confident that moderation in inflation would continue in coming months, though softening in prices of manufactured goods may be more gradual.”