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Food inflation plunges to six-year low of 0.42% for week ended 17th December

The steep fall in food inflation will act as a major incentive for the RBI to look at the option of key interest rate cuts at its next quarterly monetary policy review in January

New Delhi: Food inflation fell sharply to a six-year low of 0.42% in the week ended 17th December as prices of essential items like vegetables, onion, potato and wheat declined, reports PTI.

Food inflation, as measured by Wholesale Price Index (WPI), stood at 1.81% in the previous week. It was recorded at 15.48% in the corresponding week of 2010.

According to official data released today, onions grew cheaper by 59.04% year-on-year during the week under review, while potato prices were down by 33.76%.

Prices of wheat also fell by 3.30%.

Overall, vegetables became 36.02% cheaper during the week ended 17th December.

Experts feel the sharp fall in food inflation numbers, which was in double digits till the first week of November, has come as a big relief to both the government and the Reserve Bank of India (RBI), who have been battling high prices for over two years.

It will also be a major incentive for the RBI to look at the option of key interest rate cuts at its next quarterly monetary policy review in January.

However, other food products grew more expensive on an annual basis, led by protein-based items.

Pulses became 14.07% costlier during the week under review, while milk grew dearer by 11.30% and eggs, meat and fish by 11.56%.

Fruits also became 8.46% more expensive on an annual basis, while cereal prices were up 2.15%.

Inflation in the overall primary articles category stood at 2.70% during the week ended 17th December, as against 3.78% in the previous week. Primary articles have a weightage of over 20% in the wholesale price index.

Inflation in the non-food segment, which includes fibres and oilseeds, was recorded at 0.28% during the week under review, as against 1.37% in the week ended 10th December.

Fuel and power inflation stood at 14.37% during the week ended 17th December, as against 15.24% in the previous week.

Headline inflation, which also factors in manufactured items, has been above the 9% mark since December 2010. It stood at 9.11% in November this year.

The RBI has hiked interest rates 13 times since March 2010 to tame demand and curb inflation.

In its second quarterly review of the monetary policy last month, the central bank had said it expects inflation to remain elevated till December on account of the demand-supply mismatch before moderating to 7% by March 2012.

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