Food inflation turns -ve, RBI may cut rates

New Delhi: Food inflation turned negative for the first time in nearly six years in late December as prices of vegetables, potato, onion and some cereals fell sharply, prompting analysts to say the data provided headroom for the Reserve Bank of India (RBI) to cut interest rates and support growth. 

    Data released by the commerce and industry ministry on Thursday showed food inflation, as measured by the wholesale price index, fell by 3.36%—sharply lower than the previous week's 0.42%. It stood at 20.84% in the same year-ago period. 
    Finance minister Pranab Mukherjee said there was substantial improvement in the food inflation situation. "Food inflation has turned negative for the first time in the recent memory," he told reporters. Food inflation fell due to better supplies
New Delhi: Plunging to negative figures for the first time in six years, Thursday's data for food inflation showed vegetable prices fell by 50.22% yearon-year while potato prices declined an annual 34.01%. Onion prices which had shot up last year fell by 73.74% yearon-year. Wheat prices declined an annual 3.41%. 
    But price of pulses firmed up an annual 13.85% during the week under review. 
    C Rangarajan, chairman of the Prime Minister's Economic Advisory Council, said he expects the overall inflation to ease below 7% by end-March.Policymakers have been wrong-footed several times in the past two years while predicting the inflation trend. 
    "We have to wait for December inflation figures to see if the non-food manufacturing numbers have also followed the same path. The December numbers will indicate when and how RBI will act," he told reporters. 
    "The environment appears to be in favour of the Reserve Bank reversing its monetary policy stance," he said. 
    Economists said the decline in food inflation was largely due to a statistical base effect but also showed that supplies had improved significantly.