The Reserve Bank of India (RBI) on Monday said the sharp decline in food inflation was due to a seasonal fall in vegetable prices and a high base effect and hence, may be short-lived.
“But for the seasonal sharp decline in vegetables prices, food inflation would have remained sticky, as inflation in protein-rich items continued to be in double digits,” RBI said in the macroeconomic monetary developments report.
The central bank said structural sources of food price pressures continued to persist. Changing dietary patterns, coupled with rising incomes and significant upward revisions in minimum support prices, is expected to keep food inflation pressures high, RBI said in the report.
Primary food articles inflation declined by 4.6 per cent since the double-digit increase recorded in October. Food inflation declined through 10 consecutive weeks to a 13-year low of -3.4 per cent as on December 24. Driven by a fall in food inflation, the overall wholesale price index declined to 7.47 per cent in December from 9.1 per cent a month ago.
Starting January, RBI expects the base effects to wane and primary food inflation to firm up once the seasonal moderation ends.
Food inflation measurement should be based on calories given and amount produced of all foods. As 6 times more potato are produced than onion and as potato provide double energy than onion according to my formula potato prices should have 12 time importance in inflation calculation than onion. There will be fewer tears for less important food. In practice too as a costly food can easily be substituted by cheaper food there should be less cry for inflation in a particular food .Suppose 100 foods are produced and consumed consumption in kg per year, calories per kg and prices of food 1 are K1, C1 and P1 so monthly food inflation for January 2012 will be K1XP1XC1+K2XP2xC2+????+K100XC100XP100 for January 2012 minus same for January 2011 in percentage. Food Inflation calculation must be done monthly on average monthly prices and on yearly basis. I don't know how it is calculated at present.
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