Food inflation dips to -0.42% for week ended Jan 7

I / Mumbai January 19, 2012, 11:43 IST

Food inflation rate for the week  ended January 7, 2012 stayed negative and dropped to -0.42% on rising food demand mainly due to fall in prices of onion and vegetables.

Fuel group inflation remained unchanged at 14.45%. Primary articles index was at 2.47%.

“The inflation numbers will continue to remain range-bound till about February 12. Thereafter, we should see the numbers going up. In case RBI reduces rates in April, we will see demand-pull inflation also creeping into the economy,” Siddharth Shankar, director, KASSA told Business Standard last week.

“The headline inflation should be between 6 and 7% by end-March,” he said.

According to the official data released today, onion prices were lower steeply by 75.42% year-on-year during the week under review, while potato prices were down by 23.84%. Prices of wheat also fell by 3.57%.

Below is the Food Inflation chart for last week:

Overall, vegetables were 45.81% cheaper during the week under review than in the same period last year. Other food products, led by protein-based items, became more expensive on an annual basis.

Pulses prices were 14.27% higher during the week under review, while milk grew dearer by 11.48%. Egg, meat and fish prices were up 19.64% year-on-year.

Fruits also became 10.03% more expensive on an annual basis, while cereal prices were up 2.26%.

Inflation in the overall primary articles category stood at 2.47% during the week ended January 7, against 0.51% in the previous week. Primary articles have over 20% weight in the wholesale price index.

Experts feel that the decline in food inflation, along with moderation in headline inflation during December 2011, will be a major incentive for the Reserve Bank to look at the option of cuts in key interest rates in the near future.

Food inflation as measured by the Wholesale Price Index (WPI) had dived to -2.90% during the week ended December 31, only marginally higher from its previous week's -3.36%. Onion prices had crashed by 75% in the same week.

Last week, Finance minister Pranab Mukherjee had said that he was “confident that moderation in inflation would continue in coming months, though softening in prices of manufactured goods may be more gradual."