In a much-needed relief to consumers and comfort for the government, which has been battling the price spiral for over 18 months, food inflation slumped to nearly a four-year low at 4.35 per week ended December 3 following a significant fall in prices of wheat and vegetable owing to seasonal factors.

Coming a day ahead of the Reserve Bank's monetary policy review on Friday, the marked moderation in WPI (wholesale price index) food inflation from 6.6 per cent in the previous week has raised hopes of at least a pause, if not an easing, in key rate hikes, as indicated by the apex bank earlier, so as to catalyse investor sentiment and spur industrial growth. The shift in sentiments towards pro-growth measures, however, is despite the fact that the latest WPI data have the cushion of a favourable base — food inflation was at 10.78 per cent in the like week of 2010 — and headline inflation in November still remains unacceptably high at 9.11 per cent.

Exuding confidence over a further decline in food prices, Chief Economic Advisor Kaushik Basu, who also chairs the Inter-Ministerial Group (IMG) on tackling the price spiral, reiterated that food inflation would go down to 3 per cent by early January as the slew of policy measures had begun to show effect.

Commenting on the sharp decline — the lowest since the week ended February 23, 2008, when it was 4.28 per cent — while speaking at a Delhi Economics Conclave session here, Dr. Basu said: “…we have been fighting a long battle against inflation. Over the last year and half there have been a slew of measures...We were expecting by November-December we will begin to see full impact of these policies. We do expect this problem to ease off…It is beginning to wind down. I expect by first week of January food inflation will go down below three per cent.”

As per the weekly WPI data, while vegetables, on the whole turned cheaper by 12.28 per cent, prices of kitchen staples such as onions and potatoes slumped by 46.03 per cent and 33.28 per cent on a year-on-year basis. What prices also eased by 4.43 per cent.


Food inflation in negative territoryJanuary 5, 2012

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