Food inflation eases to slowest pace in over 5 years

Continuing its steady slide, the food inflation rate eased sharply to its slowest pace in over five years during the third week of December.

The annual wholesale price index-based food inflation rate in the week ended December 17 rose 0.42 per cent, sharply lower than the previous week's annual rise of 1.82 per cent, largely on account of the base effect.

Successive fall

This was the eighth successive weekly fall in the inflation rate and, according to analysts, the lowest reading since April 2006.

With the statistical base effect set to come into play next week as well (week ended December 24), the food inflation estimate for the coming week is expected to slip sharply into the negative.

The Government data released on Thursday showed that the slide in the inflation rate during the latest reported week was also helped by improved supplies of essential items such as vegetables.

New harvest

Despite the sharp drop in the annual food inflation rate during the latest week, pulses were up 15 per cent on an annual basis, while both milk and poultry products registered over 11 per cent year-on-year inflation.

Fruits too, clocked high inflation.

Analysts attributed the continued decline in vegetable prices to the new harvest.

Additionally, the base effect has aided in the sharp decline in the pace of food inflation.

Some products to firm up

According to Ms Aditi Nayar, Economist, ICRA Ltd, prices of non-vegetarian protein products are expected to firm up to an extent, in line with the seasonal trends.

The data released by the Commerce and Industry Ministry on Thursday showed that non-food items eased sharply, while fuel inflation too, came down.

Stubbornly high food inflation has remained a huge policy challenge for the Government for the past few years and has contributed to higher overall inflation.

The RBI has raised interest rates 13 times since March 2010 to tame price pressures.

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