New Delhi, Dec. 29: Food inflation fell to its lowest level in almost six years at 0.42 per cent during the week ended December 17 mainly on account of a low base.
The slide in food inflation, which recorded a low of 1.81 per cent in the preceding week, was also helped by the improved supplies of essential items such as vegetables.
The data bolstered hopes of a steady easing in overall price pressures that would let the central bank focus on stimulating growth.
With food inflation declining well below one per cent, finance minister Pranab Mukherjee said the overall inflation would drop to 6 per cent by March end.
“If this trend continues you will have (fiscal) year-end (headline) inflation around 6 per cent ... But it can not be lower than 6 per cent because the inflationary pressure was higher in the weeks before,” Mukherjee told reporters.
According to data released today, onions grew cheaper by 59.04 per cent year-on-year during the week under review, while potato prices were down 33.76 per cent. Prices of wheat also fell 3.30 per cent, while vegetables became cheaper by 36.02 per cent.
Experts attributed the fall to a good kharif harvest as well as a high base. “This is a base affect. The good kharif harvest has also contributed to moderation. We expect the prices to remain low for the next few weeks and this may help the RBI to go for rate cuts in the near future,” said D.K. Joshi, chief economist at Crisil.
Despite the sharp drop in the annual food inflation rate, pulses recorded close to 15 per cent annual inflation, while milk and poultry products recorded over 11 per cent inflation during the latest reported week. Fruits, too, registered high inflation.
Stubbornly high food inflation has remained a huge policy challenge for the government for the past few years and has contributed to a higher overall inflation.
The RBI has raised interest rates 13 times since March 2010 to tame price pressures. However, despite several interest-rate increases, overall price pressures had shown little sign of easing.
