The food inflation rate fell steeply to a 46-month-low of 1.81% during the week ended December 10, continuing the dramatic fall from 11.43% in mid-October as fresh arrivals of seasonal vegetables bolstered supplies and pushed down prices.
Onion prices during the week fell to about 50% of last year’s levels, when the vegetable’s price had skyrocketed to record levels.
Since the food inflation rate tracks the difference in food prices in comparable weeks over two years (example: 50th week of this year vs 50th week of last year), the difference in onion prices magnified the fall in the rate.
Prices of vegetables dropped during the week compared to last year bringing down overall food inflation, although protein-rich items such as pulses, milk, egg, meat continued to grow a fast clip. India's macro-economic managers were cautious in responding to the latest price data, which had prompted the RBI to signal pause in its interest rate hiking cycle.