India: Prices of 40% of Food Items Decline in Last Two Months, Says ASSOCHAM

July 10 - Even as the inflation at more than 11.5 per cent has touched thirteen year high, eight commodities accounting for 40 per cent of the food basket in wholesale price index have recorded average decline of 1.2 per cent in their prices over the last two months, an ASSOCHAM Eco Pulse (AEP) Study has revealed.

The food articles which have witnessed decline in prices between mid-April and mid-June are, Fruits, Pulses, Sweet Potato, Potatoes, Onions, Bajra, Sugar and wheat. The cumulative weightage of these commodities is 40 per cent in food articles and 7 per cent in the complete wholesale price index. In last one month, the prices of these commodities have declined by 1.7 per cent.

The price index of many broader categories of food items has also reduced in eight weeks period. This includes foodgrains (-0.09 per cent), fruits and vegetables (-3.02 per cent).

Besides, there are certain food commodities to have recorded decline in prices even on year-on-year basis.   Collectively wholesale prices of 13 essential food commodities including Cabbage, Onions, Potatoes, Urad, Moong, Vegetables, Fish (inland), Sweet Potatoes, Papaya, Pulses, Ragi, Sugarcane and Bajra registered a significant decline of 13.43 per cent between July 2007 to June 2008.

“Decline in the prices of food items is a healthy trend. It signifies that various measures taken by the government to tame food inflation are working”, said Mr. Sajjan Jindal, President, ASSOCHAM.

The AEP analysis is based on the difference in the value of WPI index as on 14 June and 12 April 2008, for two months rise or decline in prices. For Four week change, index value as on 10 May was taken and for six months, wholesale process as on per cent January 2008.

The prices of fruits have declined by as much as 7.5 per cent in last two months. As compared to the index value for fruits in first week of January this year, the inflation is at 1 per cent. But during last one month, the prices have gone down by as much as 11.72 per cent. Fruits contribute 7.6 per cent to the food basket.

Sugar, a major component of India food platter with 19 per cent weightage, has also recorded marginal decline of 0.9 per cent in last two months ending mid-June.

Wheat with 7.25 per cent weight in food articles, has also recorded marginal decline of 0.2 per cent between April and June. Though prices are still 1 per cent higher if compared to six months old value.

Pulses, the main suppliant of proteins in average Indian meal, have also recorded 2.5 per cent decline in the wholesale prices over last eight weeks. They account for 3.15 per cent weight of the food articles in WPI. Over the last one year, their prices have declined by 2.95 per cent. However, the inflation rate measured for last six months is still high at 4.69 per cent.

Tea, the most important beverage for the commoners in India, has witnessed the prices hardening by as much as 37 per cent during last six months period. However, there has been signs of moderation in prices with 0.94 per cent decline between April and June. Tea constitutes 0.84 per cent weight of the food basket.

Bajra, majorly used by poor households as main food grain, has also recorded the decline in wholesale prices. In last six months, the prices are down by 1.15 per cent.  During last weeks, the value of its index has slipped by 1.2 per cent. Also, the current value of index is low as compared to the last year prices by 0.39 per cent.

Onions and potatoes, the most widely used vegetables in Indian food, having respective weightage of 0.5 per cent and 1.4 per cent in wholesale food index, have also witnessed decline in their prices. Year-on-year basis, the prices of onions have dropped by 38 per cent and that of the potatoes have declined by 22 per cent. In last eight weeks also, the drop is continuous at 1.20 per cent and 1.3 per cent for onions and potatoes respectively.

                                                             Decline in Food Prices

Reasons responsible for the decline in the prices of select food commodities could be various steps taken by the Government to control rising prices. These steps include banning the export of rice, with an exception of basmati rice, since rice and wheat together mixed with lentils forms the daily staple of majority of Indians. Other measures to curb rising prices are scrapping import duties on cooking oils and maize, cutting excise and customs duties, streamlining the public distribution system and setting limits on food prices.