Food inflation plunges to 4-year low of 1.81%

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Food inflation fell sharply to a near four-year low of 1.81 per cent for the week ended December 10 as prices of essential items like vegetables, onion, potato and wheat declined.

This is the lowest rate of food inflation since the week ended February 9, 2008, when it stood at 2.26 per cent.

Food inflation, as measured by Wholesale Price Index (WPI), was 4.35 per cent in the previous week. It had stood at 13.22 per cent in the corresponding week of 2010.

According to the official data released today, onion became cheaper by 49.38 per cent year-on-year during the week under review, while potato prices were down by 34.39 per cent. Prices of wheat also fell by 4.21 per cent. Overall, vegetables became cheaper by 26.37 per cent.

Experts feel the sharp fall in food inflation numbers which was in double-digit till the first week of November comes as a big relief to both the government and the Reserve Bank who have been battling high prices for over two years.

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

Pulses became 14.22 per cent costlier during the week under review, while milk grew dearer by 11.19 per cent and eggs, meat and fish by 9.25 per cent.

Fruits also became 8.89 per cent more expensive on an annual basis, while cereal prices were up by 1.68 per cent.

Inflation in the overall primary articles category stood at 3.78 per cent during the week ended December 10, as against 5.48 per cent in the previous week. Primary articles have over 20 per cent weight in the wholesale price index.

Inflation in the non-food segment, which includes fibres and oilseeds, was recorded at 1.37 per cent during the week under review, as against 2.12 per cent in the week ended December 3.

Fuel and power inflation stood at 15.24 per cent during the week ended December 10, same as in the previous week.

Headline inflation, which also factors in manufactured items, has been above the 9 per cent-mark since December, 2010. It stood at 9.11 per cent in November this year.

The RBI has hiked interest rates 13 times since March, 2010, to tame demand and curb inflation.

In its second quarterly review of the monetary policy last month, the central bank had said it expects inflation to remain elevated till December on account of the demand-supply mismatch before moderating to 7 per cent by March, 2012.