Food inflation fell lowest nearly in six years

India's annual food inflation fell sharply to 0.42 percent, its lowest in nearly six years at least,  for the week ended December 17 as vegetables, onion, potato, wheat and other essential commodities became cheaper, official data showed on Today.

In the previous week, annual food and fuel inflation stood at 1.81 percent and 15.24 percent, respectively.

The primary articles price index was up 2.70 percent, compared with an annual rise of 3.78 percent a week earlier.

India's headline inflation has stayed above 9 percent for a year, despite 13 rate increases by the central bank since March 2010.The headline inflation based on the wholesale price index was recorded at 9.11 percent in November, according to the latest official data.

The Reserve Bank of India kept policy rates on hold at its policy review early this month, sending a strong signal that its next move is likely to be an easing of monetary policy as risks to growth increase.

Food inflation came in single digit in the second week of November and has dropped consistently since then. It was recorded at 10.63 percent for the week ended Nov 5.

In the last one and half months food inflation has dropped sharply, giving the much needed respite to the economic policy makers who had been struggling for the last two years to control the price rise.

Finance Minister Pranab Mukherjee recently said that despite the recent moderation, overall inflation still remained at an unacceptable level.

FM Pranab Mukherjee: Inflation seen easing to 6-7% by March

India's inflation is expected to ease to between 6 and 7 percent by March, Finance Minister Pranab Mukherjee said on Friday, a day after data showed a sharp easing in food inflation.

Headline inflation has barely budged from above 9 percent for a year now, driven mainly by high food prices. Any moderation in food is expected to give relief on the wider inflation reading.

Mukherjee also reiterated that he expects growth for the 2011/2012 fiscal year to be 7.5 percent, with a 0.25 percent margin of error.

Headline inflation eases to 9.11% in November

Moderating prices of essential food items like onions, potatoes and milk pulled down inflation marginally to 9.11 percent in November, a development that may prompt the Reserve Bank to halt its monetary tightening strategy at its policy review on Friday.

Inflation, as measured by the Wholesale Price Index, stood at 9.73 percent in October, 2011. It was recorded at 8.2 percent in November, 2010.

A marginal decline in inflation is good news amid the depressing scenario on the industrial production and rupee front.

While industrial production declined by 5.1 percent in October, the rupee has fallen to an all-time low below Rs 53 per dollar.

With inflation dropping, all eyes are now on the RBI's monetary policy review scheduled for December 16. The central bank has been hiking interest rates since March, 2010, in its bid to tame inflation, but in the last review, the RBI had indicated it may not hike the rates in December.

As per the data released today, inflation in food articles dipped to 8.54 percent in the month under review from 10.14 percent in the same month last year. The rate of price rise in food items stood at 14.64 percent in October, 2011.

On an annual basis, the rate of price rise in the primary articles segment also dropped to 8.53 percent in November from 14.67 percent in the same month last year. Inflation in the segment stood at 18.09 percent in October, 2011.

The data also revealed that inflation in the manufactured products segment was 7.7 percent in the month under review.

In comparison, it was recorded at 5.02 percent in November, 2010, and 7.6 percent in October, 2011.

The data further revealed that rate of price rise in vegetables during the month under review stood at 12 percent, in comparison to a 1.36 percent contraction in November, 2010. Inflation in vegetables was as high as 21.76 percent in October, 2011.

However, onion prices contracted by over 34 percent in November, in contrast to an increase of 36.82 percent in the same month last year. Similarly, there was drop in the rate of price rise in potatoes and milk on a yearly basis.