Food inflation in negative zone for 3rd week

The weekly food inflation continues to be in the negative zone for 3 weeks in a row. According to the data released by the ministry of commerce and industry on Thursday, food inflation was at -0.42% for the week ended January 7. It was at - 2.9% in the previous week.

The massive drop in onion prices (75.42%) and vegetable prices (45.81%) during the week has caused the decline. Besides, the prices of potato and wheat declined by 23.84% and 3.57%, respectively.

Experts say that the increase in supply of vegetables in the winter months and bumper onion and potato prices have resulted in fall in inflation graph in recent weeks. Besides favourable base affect has also contributed to the decline.

"Due to increase in supply of vegetables in winter months, the prices have fallen. However the prices are expected to go up by end of February and this will push food inflation," PK Joshi, senior programme coordinator, International Food

Policy Research Institute, told FE.

However other food items mainly the protein-based items, became expensive on an annual basis. The pulse prices rose by 14.27% during the the reporting week, while milk became dearer by 11.48%. Egg, meat and fish prices were up 19.64% year-on-year. Even fruits became 10.03% more expensive on an annual basis, while cereal prices rose by 2.26%.

"Available data regarding sowing trends for the rabi season indicates a shortfall in the area sown under pulses and oilseeds, which may result in a further increase in the price levels in the coming weeks. Once the impact of the favourable base effect wears off in February 2012, food inflation is expected to rise to around 6-6.5% in March 2012," Aditi Nayar, Economist, Icra noted.

Early this month, the weekly food inflation for the first time in last six years entered a negative zone (-) 3.36% following softening of prices of vegetables.

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