News for food inflation in India latest

Food inflation plunges to 4-year low of 1.81%

This is the lowest rate of food inflation since the week ended February 9, 2008, when it stood at 2.26 per cent. Vegetables became cheaper by 26.37 per cent in the week ended Dec 10.

Food inflation fell sharply to a near four-year low of 1.81 per cent for the week ended December 10 as prices of essential items like vegetables, onion, potato and wheat declined.

This is the lowest rate of food inflation since the week ended February 9, 2008, when it stood at 2.26 per cent.

Food inflation, as measured by Wholesale Price Index (WPI), was 4.35 per cent in the previous week. It had stood at 13.22 per cent in the corresponding week of 2010.

According to the official data released today, onion became cheaper by 49.38 per cent year-on-year during the week under review, while potato prices were down by 34.39 per cent. Prices of wheat also fell by 4.21 per cent. Overall, vegetables became cheaper by 26.37 per cent.

The drastic fall in food inflation could be attributed to the high base effect. Food inflation has been in double digits for most part of this year. Good harvest and seasonality have also contributed to the decline. Food prices normally move down in the winter season.

"Food inflation also determines the overall inflation which the RBI uses for its policy direction. This shows the RBI is moving in the right direction," Madan Sabnavis, Chief Economists at CARE Ratings said.

The RBI has hiked key rates 13 times since March 2010 to rein in headline inflation, which continues to be over 9 per cent. However, in its latest review, the central bank had put brakes on the rate hike cycle, citing a slowdown in growth.

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

Pulses became 14.22 per cent costlier during the week under review, while milk grew dearer by 11.19 per cent and eggs, meat and fish by 9.25 per cent.

Fruits also became 8.89 per cent more expensive on an annual basis, while cereal prices were up by 1.68 per cent.

Inflation in the overall primary articles category stood at 3.78 per cent during the week ended December 10, as against 5.48 per cent in the previous week. Primary articles have over 20 per cent weight in the wholesale price index. Fuel group inflation for week ended December 10 remained unchanged at 15.24 per cent (week-on-week).

AFFECT OF FOOD INFLATIONS :-

Banks in demand as food inflation slumps

Ten bank shares rose by 1.04% to 3.46% at 15:17 IST on BSE as food inflation declined sharply.

Punjab National Bank (up 3.46%), ICICI Bank (up 3.27%), Bank of India (up 3.24%), State Bank of India (up 2.93%), Yes Bank (up 2.78%), IndusInd Bank (up 2.37%), Axis Bank (up 2.31%), IDBI Bank (up 1.94%), HDFC Bank (up 1.49%) and Bank of Baroda (up 1.04%), edged higher.

The BSE Bankex was up 2.50% at 9,651.97. It outperformed the Sensex, which was up 0.86% at 15,819.89.

The food inflation eased sharply to 1.81% in the year to 10 December 2011, from an annual 4.35% rise in the previous week, government data showed on Thursday, 22 December 2011. The fuel inflation remained unchanged at 15.24% in the latest week compared with the prior week, data showed, while the primary articles price index rose 3.78%, compared with an annual rise of 5.48% in the previous week.

Meanwhile, banking shares also got a boost from Reserve Bank of India's (RBI) move to ease the liquidity crunch in the banking system. The central bank on Wednesday, 21 December 2011, relaxed some restrictions on borrowing by banks from it, in another move aimed at easing the cash crunch in the banking system. The RBI has allowed banks to avail themselves of funds from RBI on overnight basis, under Marginal Standing Facility (MSF), against their excess SLR holdings.

Additionally, banks can also avail themselves of funds, on overnight basis below the stipulated SLR, up to one per cent of their respective Net Demand and Time Liabilities outstanding at the end of second preceding fortnight. In the event the banks' SLR holdings fall below the statutory requirement, banks will not have the obligation to seek a specific waiver for default in SLR compliance arising out of use of this facility in terms of notification issued under sub section (2A) of Section 24 of the Banking Regulation Act, 1949, RBI said in a circular.

At its mid-quarterly monetary policy review meet on Friday, 16 December 2011, the RBI left its main lending rate unchanged in order to support faltering economic growth as inflation shows signs of cooling. While inflation remains on its projected trajectory, downside risks to growth have clearly increased, RBI said in a statement. From this point on, monetary policy actions are likely to reverse the cycle, responding to the risks to growth, RBI said.

However, it must be emphasised that inflation risks remain high and inflation could quickly recur as a result of both supply and demand forces, the central bank said in statement. Also, the rupee remains under stress, RBI said. The timing and magnitude of further actions will depend on a continuing assessment of how these factors shape up in the months ahead, RBI said. The RBI has raised rates 13 times since March 2010.

Food inflation Latest News

Food inflation surges to 8-week high

Notwithstanding the government's projections of a moderation in the rate of price rise of food items, food inflation jumped to a two-month high of 9.01 per cent for the week ended May 28 on the back of costlier fruits, onions and protein-based items.

Food inflation, as measured by the Wholesale Price Index (WPI), was 8.06 per cent in the previous week, while it was as high as 20.62 per cent during the last week of May, 2010.

The latest numbers are the highest level of food inflation since the week ended March 26 when it had stood at 9.18 per cent. For the last two months, the rate of price rise of food items has been below the 8 per cent mark.
   
As per data released by the government today, fruits became by 30.78 per cent more expensive year-on-year, while onions were up by over 14 per cent.
   
During the week under review, milk prices were up by 8.49 per cent and egg, meat and fish became dearer by 6.99 per cent. Cereals also became costlier by 5.77 per cent on an annual basis.
   
However, the prices of pulses went down by 9.49 per cent year-on-year, while vegetables and potatoes became cheaper by 0.20 per cent and 2.87 per cent.

Inflation in overall primary articles, which have a weight of 20 per cent in the headline WPI, was reported at 11.52 per cent during the week under review, up from 10.87 per cent in the previous week.
   
However, inflation of non-food primary articles fell to 20.97 per cent, as against 21.31 per cent in the previous week. This is likely to bring some cheer to the government and the Reserve Bank, who have termed inflationary pressure from the core (non-food) segment as the biggest threat to the economy in the near future.

In the non-food segment, fibres became dearer by 56.56 per cent year-on-year, while minerals were up 12.11 per cent. Fuel and power became more expensive by 12.46 per cent and petrol by 33.23 per cent on an annual basis during the week under review.

The government and RBI had said that in the months to come, inflationary pressure would be more from core (non-food) items on account of high global prices of commodities, particularly crude.
   
A rise in prices of food items was the main reason for inflationary pressure during 2010. Food inflation was in double digits for most of last year, before showing signs of moderation from March this year.
   
Food inflation had fallen to an 18-month low of 7.47 per cent in the first week of May. However, the prospects for a prolonged moderation now seem to have vanished.

Headline inflation stood at 8.66 per cent in April. The RBI, in its monetary policy for 2011-12, had projected that overall inflation would average 9 per cent during the first half of this fiscal.
   
The latest jump in food inflation numbers comes in the wake of a slew of bad news for the economy. GDP growth of the country slowed to a five-quarter low of 7.8 per cent during the January-March quarter, while the six core industries registered meagre 5.2 per cent expansion in April.
  
Experts had blamed inflation and the resultant rate hikes by the RBI, which resulted in slowing down of investment, for the poor economic growth numbers. The RBI is expected to go for another round of rate hikes at its mid-quarterly review next week.

SOURCE : http://goo.gl/p0kTe