Food inflation in negative zone for 2nd consecutive week

Food prices fell for the second consecutive week as food inflation remained in the negative zone at (-)2.90% for the week ended December 31, 2011.

Food inflation, as measured by the Wholesale Price Index (WPI), stood at (-)3.36% in the previous week. It was above 19% in the corresponding week of 2010.

According to data released today, onions became cheaper by 74.77% year-on-year during the week under review, while potato prices were down by 31.97%. Prices of wheat also fell by 3.35%.

Overall, vegetables became 49.03% cheaper during the week ended December 31.

The fall in the rate of price rise of food items since the first week of November is substantial, as it has plummeted from double-digit territory into the negative zone.

Experts feel that the decline in food inflation will be a major incentive for the Reserve Bank to look at the option of cuts in key interest rates at its next quarterly monetary policy review later this month.

However, other food products became more expensive on an annual basis, led by protein-based items.

Pulses were 14.72% costlier during the week under review, while milk grew dearer by 10.79%. Egg, meat and fish prices were up 15.22% year-on-year.

Fruits also became 9% more expensive on an annual basis, while cereal prices were up 2.03%.

Inflation in the overall primary articles category stood at 0.51% during the week ended December 31, as against 0.10% in the previous week. Primary articles have over 20% weight in the wholesale price index.