Food inflation dips; WPI may fall to 6%: Pranab | business | Hindustan Times
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Food inflation dips; WPI may fall to 6%: Pranab

business Updated: Dec 29, 2011 20:59 IST

India's annual food inflation dropped to a near six-year low of 0.42% for the week ended Dec 17 due to a sharp decline in the prices of onions, potatoes and vegetables, official data showed on Thursday.

This is the lowest level of food inflation since April 2006. 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.

Buoyed by the recent easing in food price rise, finance minister Pranab Mukherjee said the overall inflation based on the wholesale price index (WPI) is likely to come down to around 6% by the end of the current financial year.

"If this trend continues, then by the end of the year the WPI inflation will he around 6%," Mukherjee told reporters while reacting on the weekly data.

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

Mukherjee said overall inflation was unlikely to come below 6% because of higher inflationary pressure in the previous weeks and months.

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% year-on-year.

Vegetables are cheaper by 36.02%, while potato prices have declined by 33.76% 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% and vegetables by 36.29% year-on-year for the week ended Dec 17, 2010.

Annual food inflation was at 15.48% in the corresponding week of last year.

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% for the week ended Nov 5 and at 1.81% for the week ended Dec 10.

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

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

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 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%

Vegetables: (-) 36.02%

Fruits: 8.46%

Potatoes: (-) 33.76%

Eggs, meat, fish: 11.56%

Cereals: 2.15%

Rice: 1.82%

Wheat: (-) 3.30%

Pulses: 14.07%