Number of steps taken to control inflation: govt Press Trust of India / New Delhi Aug 26, 2011, 16:25

IST Article from Business Standard

Both the government and Reserve Bank have taken a number of steps to address the issue of high inflation, including the reduction of import duty on essential commodities, Parliament was informed today. "The government is aware that inflation hurts the lower income group of society. Measures taken to contain prices of essential commodities include import prices reduced to zero on rice, wheat pulses, edible oils (crude) and onions...," Minister of State for Finance Namo Narain Meena said in a written reply to a question in the Lok Sabha.

Among the other measures taken by the government to control inflation, he mentioned the ban on export of edible oils and pulses, suspension of futures trading in rice, urad and tur dal and extension of stock limit orders in case of pulses and rice. Meena also said the government has reduced import duty on skimmed milk powder, petrol and diesel and customs duty on crude oil. "As part of the monetary policy review stance, the RBI has taken suitable steps with 11 consecutive increases in policy rates and related measures to moderate demand to levels consistent with the capacity of the economy to maintain its growth without provoking price rise," he said. Headline inflation, as measured by Wholesale Price Index (WPI), has been above the 9% mark since December, 2010, and stood at 9.22% in July this year. Food inflation stood at 9.80% in mid-August. The government has been under attack from various quarters over sustained inflationary pressure. In its Annual Report released yesterday, the RBI said inflation is likely to stay elevated at least till the third quarter of the current fiscal, before falling to 7% by March, 2012.Meena said the impact of inflation is different in urban areas vis-a-vis rural areas. "The impact of inflation on rural and urban areas differs because of the diverse consumption pattern and income distribution," the minister said without further elaboration. He said that inflation, as measured by the Consumer Price Index (CPI) for both Rural Labourers and Industrial Workers, has fallen substantially during the last few months. While the CPI-Rural Labourers slipped from 17.35% in January, 2010, to 9.03% in July this year, the CPI-Industrial Workers came down from 16.22% in January, 2010, to 8.62% in June, 2011. "In response to the anti-inflationary policies of the government, CPI-RL based inflation has eased to 9.03% in July, 2011, from its peak of 17.35% in January, 2010," Meena said.

10 reasons why the Indian economy has gone off track

Last updated on: May 28, 2012 11:09 IST
Rediff.com Business 10 reasons why the Indian economy has gone off track

10 reasons why the Indian economy has gone off track

Last updated on: May 28, 2012 11:09 IST

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One: Inflation Monster

The single biggest failure of the second United Progressive Alliance government has been its
inability to control inflation in general and food inflation in particular. Food prices, as measured by the official wholesale price index, have gone up at a faster pace over the last three years than they did in the five years of the first UPA government. Inflation adversely impacts the poor more than the rich or the middle classes and results in an indirect transfer of resources from the worse-off to the better-off sections of the population. When inflation is driven by high food prices as it has in India in recent years, the deleterious consequences are magnified since the economically underprivileged spend half or more of their incomes on food. Food inflation has not merely immiserised the poor and sharply eroded the real incomes of middle class families -- it has widened inequalities between the affluent and the indigent. The rich has certainly got richer. And even if the poor may not have got poorer, the gap between the rich and the poor has certainly widened contributing to social tensions. Whereas cereal prices have not gone up relatively, the increases in the prices of vegetables, fruits, milk and dairy products have been particularly steep. Inflation has had a negative impact on household savings and slowed down the demand for consumer durables and industrial products. wo: Ineffective Monetary Policies

To treat the problem of inflation as largely a monetary policy issue and by placing a great onus
on the Reserve Bank of India to curb inflation by containing liquidity, the government has simplistically followed textbook notions of checking "too much money chasing too few goods". Food inflation has been primarily driven by supply constraints. The mismatches between demand and supply have worsened on account of inadequate coordination between different ministries (Commerce, Finance, Agriculture, Food and

Consumer Affairs) to balance the needs of exporters and the domestic market, causing spikes in the prices of particular food products like sugar, onions and pulses. Thus, by tightening liquidity, the RBI has had to perforce harden interest rates, which, in turn, has contributed to a slowdown of investments in industry and capital formation. The dip in the index of industrial production has exacerbated the phenomenon of "jobless growth" in the country, even as the government has remained singularly obsessed with stepping up the rate of growth of gross domestic product (GDP) and not with ensuring equitable distribution of the benefits of economic growth. Three: Weakening Rupee

The depreciation in the value of the Indian rupee vis-a-vis the US dollar is a consequence not
only of external factors but also of the country's imports growing faster than exports resulting in the trade deficit jumping by 56 per cent between 2010-11 and 2011-12. The deficit has sharply widened because imports - more than half of the country's import bill is accounted for by two items, crude oil and gold - are inelastic and export growth has been sluggish. India's export markets in the West have disappeared or shrunk drastically on account of the Great Recession while many of the country's exportable products are still not sufficiently competitive in Asian markets (despite the recent depreciation). The fall in the external value of the rupee by a fifth over the last year has contributed to foreign institutional investors shying away from stock exchanges (leading to the decline in share indices) and foreign direct investors repatriating larger amounts to their home countries, even as domestic industrialists prefer to invest outside India rather than at home. The higher rupee value of imported petroleum - India currently imports 80 per cent of the country's total requirements of crude oil - is adding to inflationary pressures. Four: Oily Mess

The country's petroleum sector is in a state of chaos. It is claimed that petrol prices have been
decontrolled but public sector oil refining and marketing companies like Indian Oil Corporation do not increase prices without a nod from the government. Otherwise, how does one explain the sudden one-shot increase of Rs 7.50 in the retail price of each litre of petrol on May 23 when oil companies could have gradually increased petrol prices over the last five months? With the gap between petrol and diesel prices rising and with the government unwilling to increase excise duties on diesel cars, sales of diesel cars continue to shoot up adding to urban pollution and wastage of subsidies. Meanwhile, the adulteration of kerosene with other petroleum products continues to be rampant. The government does not want to give up its shares of taxes from the petroleum industry and oil companies persist in paying dividends and showing profits on their books of account while complaining loudly about "under-recoveries" on account of subsidized sales of diesel, cooking gas and kerosene. What a slippery slope? Five: Crony Capitalism

The ugly underbelly of the policies of economic liberalisation followed over the last two
decades has been crony capitalism at its worst. The most prominent of Indian industrialists have emulated some of the worst practices of Russian and Chinese oligarchs in the manner in which they have successfully influenced government policies and systematically subverted the rule of law. One example will illustrate this contention. There are at present seven mobile phones for every ten citizens - and more phone subscribers than human beings in most urban areas - in a country where there used to be one phone for every thousand individuals as recently as 1997, three years after the government gave up its monopoly over the telecommunications sector. This is also the same sector which has witnessed the biggest scandal in independent India (and perhaps in the world) on account of misallocation and undervaluation of scarce electromagnetic spectrum that may have resulted in a "presumptive" or "notional" loss of close to US$ 40 billion to the exchequer, according to the Comptroller & Auditor General of India. Even as official policies continue to marginalize public sector corporations (witness the current state of Air India and Bharat Sanchar Nigam Limited, to name only two), powerful lobbies of private industrialists continue to exert an influence on government decisions. Contracts are tailored to benefit private companies at the expense of government organizations, an example being the natural gas exploration contracts relating to Reliance Industries Limited and the Oil & Natural Gas Corporation. Six: Misutilisation of Natural Resources

The second-generation (2G) spectrum scam epitomizes the manner in which the Union
government, which is supposed to act as a custodian of natural resources that belong to the people of the country, has failed to perform its functions in a prudential and impartial manner. Instead of ensuring transparency in the manner in which natural resources are valued and allocated, government policies have been opaque and less than fair resulting in a plethora of allegations of corruption and nepotism. From coal and natural gas to iron ore and telecom spectrum, from the manipulation of land use laws by Adarsh Housing Society in south Mumbai to the way in which the Commonwealth Games were conducted in New Delhi, those in positions of power have brazenly sought to cover up acts of abuse of discretionary authority and illegal appropriation of rents. The issue of land acquisition by private industry for non-agricultural purposes - for digging up coal or for setting up special economic zones for export-oriented industries -- remains highly contentious and deeply divisive. Seven: Reluctant Regulation

The misutilisation of natural resources has been facilitated by reluctant regulators, who were
typically former bureaucrats and who were often selected for their subservience to their political masters. From financial markets to electricity distribution, the government did not

deliberately empower regulatory authorities in the wake of economic liberalisation thereby offering wide windows of opportunity to crony capitalists to milk the system and earn supernormal windfall gains. The regulatory bodies became sinecures to park loyal babus after they retired. The government did away with the Monopolies and Restrictive Trade Practices Commission with alacrity but failed to expeditiously empower the Competition Commission that could check abuses of market dominance. The Petroleum and Natural Gas Regulatory Board is another example of a body that has been consciously rendered toothless and made a fringe player.
Rediff.com Business 10 reasons why the Indian economy has gone off track

10 reasons why the Indian economy has gone off track

Last updated on: May 28, 2012 11:09 IST

Eight: Politics-Crime-Business Nexus

The combination of crony capitalism, reluctant regulation and misutilisation of natural

resources has manifested itself in the ugly nexus among corrupt politicians, criminals and businesspersons. No one symbolises this nexus better than Gali Janardhana Reddy, former Minister for Tourism, Infrastructure Development and Youth Affairs in the government of Karnataka led by B.S. Yeddyurappa.

While both have been disgraced and have had to spend time behind bars, they successfully spearheaded the systematic loot of iron ore located in the districts of Bellary in Karnataka and Ananthapur in Andhra Pradesh. Much of the illegally-mined ore was exported to China in the run-up to the Beijing Olympics. Other examples of the operation of this corrupt nexus can be found in different parts of the country, in Jharkhand, Madhya Pradesh, Orissa and Rajasthan, where representatives of the mining mafia rule the roost because of their close association with influential politicians and bureaucrats. Nine: Red Corridor

Juxtapose the mineral map of India with maps showing the presence of forest resources, areas
where tribals and indigenous communities dominate and zones where left-wing extremism are at their peak, and one will discern the presence of the proverbial 'red corridor' that occupies over a fourth of the country's geographical area from the Himalayan mountains (the Pashupati temple in Nepal) to the Bay of Bengal (not far from the Tirupathi temple). Is it a coincidence that these areas overlap with one another? Certainly not. India is right now in a vicious cycle in dealing with what Prime Minister Manmohan Singh has time and again described as the country's "biggest internal security threat". We all agree that the Maoist "menace" cannot be treated as a law-and-order problem but one relating to absence of development. Good officers do not want to serve in these districts. Roads, schools, health-care centres and mobile phone towers are not built because Naxalites don't want them. So these areas remain economically challenged even though on paper, money is shown as being spent. And left-wing extremists gain ground. The vicious cycle goes on.

Rediff.com Business 10 reasons why the Indian economy has gone off track

10 reasons why the Indian economy has gone off track

Last updated on: May 28, 2012 11:09 IST

Ten: Political Paralysis

Instead of focusing on reforms for the health-care and education sectors and proper delivery of
subsidies to assist the fourth of the country's population whose conditions are worse than those who live in Sub-Saharan Africa, the government has tried to bring about contentious policy changes - such as allowing foreign investments in multi-brand retail outlets - that elude a consensus within the ruling coalition, leave alone the entire political class. Rather than concentrating its efforts on hiking the cap on foreign investments in insurance companies and allowing pension companies to play the stock markets, the government could have tried much harder to bring about what is arguably the most important economic reform measure, namely, a common goods and services tax across the country's 28 states and seven Union territories that would not just unite India's fragmented market but also reduce corruption by ensuring transparency.

News related to inflation source : http://www.worldjute.com/inflation.html

Inflation creeps up 7.55 per cent in August

New Delhi, September 15, 2012: The WPI (wholesale price index)-based headline inflation has crept up to 7.55 per cent in August from 6.87 per cent in July owing to rising prices of food items as well as manufactured goods. Even as the bold reform measure aimed at partly rationalising fuel subsidies will put an additional burden on the common man, economists and apex industry chambers, in particular, have hailed the step as the governments first initiative towards fiscal consolidation while

hoping against hope that the Reserve Bank of India (RBI) would do its bit to boost investment and growth by easing key policy rates on September 17. However, even though the overall inflation in August this year is well below the level of 9.78 per cent that prevailed in the same month of 2011, the apex bank is unlikely to oblige India Inc in view of the continuing inflationary expectations, and the cascading effect of higher diesel prices to the extent of about 80-100 basis points. The WPI inflation data for August revealed that even as food inflation eased marginally to 9.14 per cent in August from 10.06 per cent in the previous month, the worrying factor is that manufacturing or core inflation, which had shown a down trend in previous months, also inched up to 6.14 per cent from 5.58 per cent in July on account of higher prices of cotton textiles, paper and paper products, cement and lime. Admittedly, with transportation costs going up in the days ahead following the over Rs. 5 per litre hike in diesel prices, a spike in the prices of food articles as well as manufactured goods starting from steel and cement to consumer goods is a certainty although the intensity is likely to vary depending on the absorption capacity of the producing units. As per the WPI data on food articles, pulses turned dearer by 34.39 per cent while wheat and cereal prices went up by 12.85 per cent and 10.71 per cent, respectively, in August on a year-on-year basis.Meanwhile, headline inflation for June was revised up to 7.58 per cent from 7.25 per cent.

Inflation declined to 6.87 per cent in July

Delhi, August 14, 2012: Inflation declined to 6.87 per cent in July, mainly driven by higher food prices, government data showed on Tuesday. Inflation, as measured by the Wholesale Price Index was 7.25 per cent in June as prices of manufactured items eased a little, although vegetables, wheat and pulses became costlier. It was 7.55 per cent in May. In June 2011, it was 9.51 per cent. ; Reserve Bank Governor D Subbarao had said in July that the inflation numbers on both the wholesale and retail front are way above the central bank's comfort level. Subbarao said, "We are way above the threshold" and a level of around 5 per cent on the headline inflation is the RBI's threshold. On July 31, Reserve Bank of India left key interest rates unchanged to fight inflation. The key lending (repo) rate, at which banks borrow from RBI, has been retained at 8 per cent despite demands from the industry to cut interest rates to spur economic growth. The Cash Reserve Ratio (CRR) - the amount of deposits banks keep with RBI in cash - has also been retained at 4.75 per cent.

June inflation slows to 7.25 percent

NEW DELHI, July 16, 2012 (Reuters): India's headline inflation slowed to its lowest level in five months in June. The wholesale price index (WPI) - India's main inflation gauge - rose an lower-than-expected annual 7.25 percent in June, its slowest rise since January, following a drop in prices of some fuel items. Wholesale prices rose 7.55 percent in May. Businesses want lower interest rates to help drag Asia's third largest economy back from a nine-year low of 5.3 percent GDP growth in the first quarter of 2012. But a faltering monsoon, key to volatile food prices, tempered expectations of a rate cut, with the government warning inflation could accelerate without more rain. The government bond yields and overnight index swaps (OIS) rates fell after Monday's data, but the rupee and stock market flattened after an initial bump, as traders calculated that at around 4.9 percent, core inflation was too high to significantly increase chances of a rate cut at the Reserve Bank of India's July 31 policy meeting. "I do not expect this number to prompt the RBI to immediately cut rates," said Shubhada Rao, Chief Economist at Yes Bank in Mumbai. "The inflation expectation still remains elevated, and the outlook is cautious because of the performance of monsoon, and its impact on food prices, as well as the impending and much awaited hike in fuel prices." Food prices, which rose 10.81 percent in June from a year earlier, up from 10.74 percent in May, have been mainly responsible for India's long struggle with inflation. "If the monsoon turns out to be different from our expectation then it can push up inflationary expectation, then inflation can go up. Therefore, much depends on it,"

warned the prime minister's economic advisor C. Rangarajan. Annual fuel inflation was 10.27 percent in June, down from 11.53 a year earlier. A weak Indian rupee has largely offset falling global crude prices and prevented fuel inflation slowing further.

Inflation rises to 7.55% in May

New Delhi, June 14, 2012 (PTI): Inflation moved up to 7.55 % in May because of a spurt in prices of potato, pulses and wheat, although onion and fruits showed a declining trend. Inflation, as measured by the wholesale price index (WPI), was 7.23 per cent in April. In May last year, it was 9.56 per cent. Overall food inflation rose to 10.74 per cent in May, from 10.49 per cent in April. Food articles have a 14.3 per cent share in the WPI basket. Potatoes turned costlier by 68.10 per cent during May on annual basis. For April, the rate of price rise was 53.44 per cent. Besides, pulses and wheat turned expensive by 16.61 per cent and 6.81 per cent respectively. However, vegetables inflation was lower at 49.43 per cent in May. In April, the rate of price rise was 61 per cent. Besides, eggs, meat and fish prices rose 17.89 per cent during the month, slightly higher than 17.54 per cent in April. Inflation in milk was 11.90 per cent, while rice and cereals turned costlier by 5.07 per cent and 5.73 per cent respectively. Onion prices declined by 7.23% in May, against 12.11 per cent in April. Non- food manufactured inflation showed some easing and was 5.02 % in May. It was 5.12% in April. The headline inflation number for March was revised upwards to 7.69 per cent, from the provisional estimate of 6.89 per cent. Inflation in overall primary articles crossed double digits to 10.88 per cent in May, from 9.71 per cent in April. Inflation in non-food primary articles, which include fibres and oilseeds, increased sharply by 8.47 per cent in May. In April, it was 1.61 per cent. In the 'fuel and power' segment, inflation rose by 11.53 per cent on an annual basis. The rate of price rise was 11.03 per cent in the previous month. Oilseed prices shot up by 19.18 per cent in May. The rate of price rise was 16.66 per cent in April. On year-on-year basis, among manufactured items, iron grew dearer by 14.93 per cent, while edible oil prices rose by 10.53 per cent. Inflation in tobacco products and basic metals was 7.80 per cent and 10.31 per cent respectively. Experts said the inflationary pressure, driven by prices of food articles, will keep the pressure on the government to remove supply side bottlenecks. Overall inflation hovered at double digits for most of 2010 and 2011. The Reserve Bank of India RBI) increased key policy rates 13 times, totalling 350 basis points, between March 2010 and October 2011 to tame inflation. Since January, RBI has been injecting liquidity into the financial system, by reducing the cash reserve ratio for banks. Besides, it has called for fiscal steps by the government to combat inflation. In its annual monetary policy last month, RBI cut key lending rate by 50 basis points to lower borrowing costs amid falling industrial and economic growth. RBI has projected inflation to be around 6.5 per cent by March 2013, with a caution that there is need to arrest the decline in economic growth.

Inflation falls to 6.89 percent in March

New Delhi, April 16, 2012 (IANS) Inflation declined marginally to 6.89 percent in March as compared to 6.95 percent in the previous month even as prices of vegetables, pulses and milk rose sharply, adding to the Reserve Bank of India's dilemma over rates cut in the annual monetary policy Tuesday. The monthly wholesale price index data released by the ministry of commerce and industry Monday showed that inflationary pressure continued in the system. Prices of vegetables surged by 30.57 percent year-on-year in the month under review, milk became costlier by 15.29 percent, pulses became dearer by 10.05 percent and prices of egg, meat and fish rose by 17.71 percent. However, onion, fruits, wheat, fibres and non-food articles became cheaper during the last month of 2011-12 when compared to the price of these items in the corresponding month of previous year. The government revised upward the January inflation data to 6.89 percent as compared 6.55 percent announced earlier. Build-up inflation in 2011-12 was 6.89 percent as compared to a build up of 9.68 percent in the previous year. Manufactured products, which have almost 65 percent

weight in the Wholesale Price Index (WPI), showed moderation in prices. Inflation in manufactured products moderated to 4.87 percent in March as compared to 5.75 percent in the previous month. Industrial output grew by lower than expected 4.1 percent in February, according to official data released last week. Continued inflationary pressure and lower than expected growth have added to the dilemma of the central bank. It is widely expected that the Reserve Bank of India would lower policy rates by 0.25 percent Tuesday in its monetary policy for 2012-13. The RBI has not cut rates in the last three years.

Inflation based on Consumer Price Index at 7.65% in January

New Delhi, february 21, 2012 (PTI): Inflation based on the all India Consumer Price Index stood at 7.65% in January, as per the first nationwide retail inflation data released by the government today. While 'food and beverages' reported a moderate rate of price rise of 4.11% year-on-year in January, the inflation numbers for fuel and light, and clothing, bedding and footwear segments were in double-digits. Overall retail inflation in rural and urban areas stood at 7.38% and 8.25% in January, respectively. "There was a long pending demand of ministries and various users for a comprehensive consumer inflation rate. To meet this demand, annual inflation rates based on this broad based CPI series for January 2012 are released today," Minister of State (Independent Charge) in the Ministry of Statistics and Programme Implementation Srikant Jena said. The all India CPI will be in addition to the three retail price indices -- for agricultural labourers, rural labourers and industrial workers --prepared by the Ministry of Labour. The new nationwide CPI is being prepared by the Ministry of Statistics and Programme Implementation (MOSPI) and is eventually expected to replace the Wholesale Price Index (WPI) as the benchmark inflation. Vegetables were cheaper by over 24% on a nationwide basis in January over the same month last year. However, other f od and beverages reported a rise in prices. In rural and urban areas, inflation in the category stood at 4.18% and 3.98%, respectively. Milk and milk products became 16.53% more expensive on an annual basis, while price of oils and fats went up by 13.47% in January. Condiments and spices became dearer by 11.83% and fruits by 10.62% in the month.

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Food inflation turns negative -1.03% on January 27, 2012 Food inflation turns negative -0.42% on January 19, 2012 Food inflation turns negative; -2.9% on January 12, 2012 Food inflation turns negative; -3.36% on January 5, 2012

Food inflation turns negative -1.03% on January 27, 2012

New Delhi, January 27, 2012: India's food inflation declined slightly to -1.03 per cent for the week ended January 14 as compared to -0.42 per cent for the previous week, staying in negative territory for the fourth straight week, as prices of essential items such as wheat, vegetables, potatoes and onions maintained a downtrend. The inflation rate for fuel, however, remained unchanged at the previous two weeks' level of 14.45 per cent, an official statement said here today, quoting provisional data. According to the data, the prices of wheat were down 3.37 per cent from a year ago, vegetables by 47.06 per cent, potatoes by 22.46 per cent and onions by 79.10 per cent. The prices of pulses were up by 12.77 per cent from a year ago, cereals by 2.71 per cent, rice by 1.58 per cent, fruits by 5.17 per cent, milk by 12.25 per cent and eggs, meat and fish by 20.33 per cent. Overall, the annual rate of inflation for Primary Articles, which have a weight of 20.12 per cent in the wholesale price index (WPI), stood at 1.89 per cent as compared to 2.47 per cent for the previous week. The index for this major group remained unchanged at its previous week's level of 199.1, the provisional data showed.

Food inflation turns negative -0.42% on January 19, 2012

New Delhi, January 19,2012 (PTI): Food inflation remained in the negative zone for the third straight week, at (-)0.42 per cent for the week ended January 7, mainly due to a fall in the prices of onions and vegetables. Food inflation, as measured by the Wholesale Price Index (WPI), was at (-) 2.9 per cent in the previous week. It was above 16 per cent in the corresponding week of 2011.

According to the official data released today, onion prices plunged sharply by 75.42 per cent year-onyear during the week under review, while potato prices were down 23.84 per cent. Prices of wheat also fell 3.57 per cent. Overall, vegetables were 45.81 per cent cheaper during the week under review against the same period last year. Other food products, led by protein-based items, became more expensive on an annual basis. Pulses prices were 14.27 per cent higher, while milk grew dearer by 11.48 per cent. Egg, meat and fish prices were up 19.64 per cent year-on-year. Fruits also became 10.03 per cent more expensive on an annual basis, while cereal prices were up 2.26 per cent. Inflation in the overall primary articles category stood at 2.47 per cent during the week ended January 7, against 0.51 per cent in the previous week. Primary articles have over 20 per cent weight in the wholesale price index. Experts feel that the decline in food inflation, along with moderation in headline inflation during December 2011, will be a major incentive for the RBI to look at the option of cuts in key interest rates in the near future.

Food inflation turns negative; -2.9% on January 12, 2012

NEW DELHI, January 12, 2012: India's wholesale price index for food articles dropped 2.9% in the week ended December. 31, declining for the second week. In the previous week, annual food inflation stood at -3.36 percent. On a week-on-week basis, however, the food articles index rose 0.4% to 190.8 from 190.0 the previous week, government data showed Thursday. The primary articles index, which includes food and non-food articles, increased 0.5% from a year earlier, compared with a 0.1% rise recorded in the week ended Dec. 24. On a week-on-week basis too, the primary articles index rose 0.5% to 198.6. Analysts said the fall in the food price index was mainly due to a high base of comparison as the year-earlier food inflation was hovering near its record high at over 20%. The fuel index was unchanged from the previous week at 172.7.

Food inflation turns negative; -3.36% on January 5, 2012

NEW DELHI, January 5, 2011: Food inflation turned negative in the year to December 24, at -3.36 per cent, while fuel inflation accelerated to 14.6 per cent, government data on Thursday showed. In the previous week, annual food and fuel inflation stood at 0.42 per cent and 14.37 per cent, respectively. The primary articles price index was up 0.10 per cent, compared with an annual rise of 2.70 per cent a week earlier. Headline inflation has stayed above 9 per cent for a year, despite 13 rate increases by the central bank since March 2010. "If this trend continues then you will have (fiscal) year- end (headline) inflation around 6%," Mukherjee told reporters. Food articles have a 14% weight in the wholesale price index (WPI), the most widely followed measure of inflation in the country. The moderation in food and fuel inflation should help the stubbornly high headline inflation-which has stayed above 9% for a year-decline in December. The annual rate of inflation was 9.11% in November. The RBI paused its interest rate increases in its December 16 policy review and indicated its willingness to ease monetary policy if inflation moderates. "This is a very good sign and shows that the decline is consistent," said Bank of Baroda chief economist Rupa Rege Nitsure. "However, we'll have to wait and watch how headline inflation will perform, given the pressures from imported inflation on manufactured goods," she added. Food inflation started falling from mid November, driven primarily by a sharp fall in inflation in vegetables. The rate of decline speeded up early this month, triggered by a sharp seasonal drop in prices and a strong statistical base effect of high inflation last year. Source: The Economic Times