Food prices drop meat, milk, eggs, fish not on deflation diet

Food inflation has remained in negative territory for a third week, though the rate of decline has slowed quite a bit in the first week of 2012. Though prices of most articles continued to fall, there was pressure from protein-based goods. 

Food inflation was a negative 0.42 per cent for the week ended January 7, up from minus 2.9 per cent in the last week of December.  

Vegetables and wheat continued to see a decline in prices. Analysts said this would not be enough for the Reserve Bank of India to cut key policy rates, since food inflation is seasonal and core inflation (the rate of price rise in manufactured products without processed food items) is still high.

Headline inflation was down for the first time in a year to below nine per cent, at 7.47 per cent in December, mainly on the back of the sharp decline in food inflation.

The decline in the rate of fall in food prices for the first week of  January can be partly credited to the base effect, as food inflation eased to 16.18 per cent in the corresponding week of last year from 19.09 per cent the previous week.  

Onions saw deflation down to 75.42 per cent from 74.77 per cent a week before. Potato inflation was minus 45.81 per cent, slightly up from minus 49.03 per cent a week before.

Vegetables in general saw deflation rising to 23.84 per cent during the week ended January 7, from 31.97 per cent the week before.

Protein-based items such as eggs, meat and fish continued to put pressure on inflation, mainly due to seasonal factors. Their rate of price rise was 4.42 percent up, to 19.64 per cent. Milk, too, saw inflation rising to 11.48 per cent from 10.79 per cent last week.

Finance minister Pranab Mukherjee said last week that the moderation in food prices would help bring down headline inflation to six to seven per cent by March 2012.

Food products have a 14 per cent weight in the wholesale price index, the movement of which determines the inflation rate.

“Inflation will stabilise at the current level before taking an upward move in the second quarter of the current calendar year,” said Siddharth Shankar, director, KASSA.