A combination of the post-harvest cooling of food prices combined with a favourable base effect ensured that food inflation eased to its lowest in well over three years in early December.
Apart from the base effect, the dip in the wholesale price index-based food inflation rate to 4.35 per cent during the week ended December 3, down from the preceding week’s 6.6 per cent, was aided by a decline in the year-on-year inflation levels of essential items, including cereals such as wheat and vegetables such as onions and potatoes, Government data showed on Thursday.
This was the sixth successive weekly fall in the inflation rate and the reading is the lowest since February 23, 2008, analysts said.
The favourable base effect is expected to continue in the remaining months of December, which would ensure a further slide in food inflation levels.
The Chief Economic Adviser, Dr Kaushik Basu, said food inflation is expected to ease to 3 per cent by early January. However, the gradual easing would be due to seasonal factors and a comparison with high index levels last year, he added.
According to data for the latest week, onions were down over 46 per cent year-on-year, while potatoes eased by over 33 per cent, due to which the vegetables sub-group dipped by over 12 per cent. Wheat too dipped over 4 per cent. However, other food products turned more expensive on an annual basis, led by protein-based items.
Pulses were up nearly 12 per cent during the week under review, while milk was up over 11 per cent and eggs, meat and fish by over 9 per cent.
Economists expect food inflation to ease to around 3 per cent in December 2011 while headline inflation is expected to moderate further to around 8 per cent.