6.1.12

Food inflation turns negative

Food inflation turned negative for the first time in nearly six years in late December as prices of vegetables, potato, onion and some cereals fell sharply, prompting analysts to say the data provided headroom for the Reserve Bank of India (RBI) to cut interest rates and support growth. Data released by the commerce and industry ministry on Thursday showed food inflation, as measured by the wholesale price index, fell by 3.36%—sharply lower than the previous week’s 0.42%. It stood at 20.84% in the same year-ago period. Finance minister Pranab Mukherjee said there was substantial improvement in the food inflation situation. “Food inflation has turned negative for the first time in the recent memory,” he told reporters. Thursday’s data for food inflation showed vegetable prices fell by 50.22% year-on-year while potato prices declined an annual 34.01%. Onion prices which had shot up last year fell by 73.74% year-on-year. Wheat prices declined an annual 3.41%. But price of pulses firmed up an annual 13.85% during the week under review. Policymakers have been wrong-footed several times in the past two years while predicting the inflation trend. Economists said the decline in food inflation was largely due to a statistical base effect but also showed that supplies had improved significantly.

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