Inflation eased to 0.18 per cent, a new low in over 30 years, although vegetables cost 25 per cent more than it did a year ago and so did other food items - making it a political scoring point in Parliamentary polls underway from Thursday.
Inflation fell by 0.08 percentage points during the week ended April four against 0.26 per cent in the previous week, but a number of food articles such as pulses, cereals, processed fish, common salt, tea, coffee, tobacco, soft drinks and liquor turned dearer, besides vegetables.
"Prices of food items like pulses have remained high because of poor harvest. Some odd categories like vegetables are seasonal. They have gone up by 25 per cent. Vegetable prices are quite volatile. They will correct themselves very quickly," Crisil Principal Economist D K Joshi said.
Vegetables turned dearer by 24.9 per cent and oil cakes by 2.4 per cent on a weekly basis. However, year-on-year processed fish was expensive by 42.75 per cent, liquor by 25.41 per cent, tea and coffee by 14.44 per cent, pulses by 9.12 per cent and cereals by 9.45 per cent.
As wholesale price-based inflation drew towards zero, RBI could be in a dilemma to cut policy rates or not in its annual monetary policy next week as food prices went up by 1.2 per cent on weekly basis and 7.29 per cent on yearly basis, but analysts expect the central bank to reduce key rates.