A sharp drop in prices of vegetables, especially potatoes and onions, facilitated an extended stay for food inflation in the negative zone at minus 1.03 per cent for the week ended January 14 even as prices of other edibles continued to rule at higher levels.
The official data released here shows that food inflation, as measured by the wholesale price index (WPI), has moved deeper into negative territory from (-) 0.42 per cent in the previous week ended January 7. However, statistically, much of the decline in the price spiral was owing to the effect of a high base as food inflation during the like week in January 2011 was at a high of over 17 per cent.
Ostensibly, it is on account of the high base effect that food inflation is expected to remain in negative zone for some more time during the current fiscal and contribute to the anticipated decline in headline inflation to 7 per cent by the end of March. Once the base effect impact on the inflation data wears off some time by the end of February, food inflation is likely to bounce back to positive territory.
However, such seven-day comparisons in food inflation will soon not be feasible any more as the government has decided to do away with the practice of releasing weekly WPI data on primary food articles and fuel as the numbers were not presenting a “holistic” picture of the price scenario. With the Union Cabinet opting for a switch to the earlier system, the government will continue to release only a monthly WPI headline inflation data containing the break-up for all segments of goods, including food and non-food articles, fuel and manufactured items.
The change, however, is in keeping with global norms. “Doing away with the weekly inflation data would mean that the volatility associated with week-on-week variations would cease to cause concern. Globally also, it is the norm to give inflation numbers on a monthly basis,” Crisil's chief economist D. K. Joshi said.
Especially owing to a drop in food prices, headline inflation in December slipped from near double-digit levels during the major part of 2011 to a two-year low of 7.47 per cent in December.
As per the weekly data, the maximum fall was in the prices of onions by 79.10 per cent year-on-year, followed by potatoes which turned cheaper by 22.46 per cent even as the decline in prices of vegetables overall was to the extent of 47.06 per cent.
Wheat prices were also down 3.37 per cent. Other edibles, however, continued to cost more.
