Why Food Inflation has become negative in India?

Food Inflation has continued to remain negative for second consecutive week. This is indeed surprising for a country which has been reeling under high inflation has last one and a half years. The central bank was forced to  increase repo and reverse repo rates for 13 times in last 18 months to curd rising inflation.

It is pertinent to note that inflation is India is still very high and continues to be more than 9% as per Wholesale Price Index (WPI), however food inflation which is a part of this index has shown negative growth. This has happened primarily because of fall in prices of food items. Apart from the fact that price of some food items have fallen down, high base effect has also resulted in food inflation becoming negative.

While food inflation is -2.90 as per data released today, this is likely to scale up in the months to come. Major factors contributing in fall of food inflation are onion price which has became cheaper by 74.77 per cent year-on-year during the week under review and potato prices which were down by 31.97 per cent. Prices of wheat also fell by 3.35 per cent.Overall, vegetables became 49.03 per cent cheaper during the week ended December 31.