Food Inflation dropped to a Three-and-half-year-low of 6.6% for Week Ended 26 November 2011

As per the governement data released on 8 December 2011, food inflation dropped to almost a three-and-a-half-year-low of 6.6% for the week ended 26 November 2011. It is the lowest rate of food inflation, as measured by the Wholesale Price Index, since 9 August 2008, when it stood at 6.19 per cent. Food inflation stood at 8 per cent in the previous week ended 19 November 2011.

The sharp fall in food inflation was attributed to good harvest that reduced vegetable prices further, thereby raising hopes that the stubborn inflation will finally ease. Food articles have a 14.3% weight in the wholesale price index. Vegetable prices were 1.25 per cent cheaper than twelve months earlier in December 2010 while cereals, milk, eggs, meat and fish grew dearer at a slower rate.

Food items were 0.97 per cent cheaper with vegetable prices 5.28 per cent lower. Potatoes were 15.75 per cent cheaper than in December 2010. Onions were 39.20 per cent cheaper as well after their prices fell 1.45 percentage points lower.

Inflation for milk fell 0.39 percentage points to 11.02 per cent while the measure for eggs, meat and fish dropped 3.51 percentage points to 10.04 per cent.

Inflation for rice shed 0.18 percentage points to 2.34 per cent while the measure for pulses dropped 0.8 percentage points to 13 per cent.

Inflation rose for fruits. Fruit prices grew 2.74 percentage points faster than in the in the week ended 19 November 2011 at 10.72 per cent. Cereal prices were also 1.68 per cent higher, compared to 1.97 per cent in the previous week. Wheat prices gained 0.01 percentage points and were 4.71 per cent higher.

Prime Minister’s Economic Advisory Council (PMEAC) Chairman C Rangarajan was of the opinion that the fall in inflation figures reflected high vegetable prices after unseasonal rain in 2010 and their normal tendency to fall in the winter. The seasonal pattern of decline in prices helped to reduce inflation.

Fruit and vegetables and items such as milk, meat and eggs have kept food inflation high, which in turn kept the overall inflation at over 9% during the 11 months till November.