BoB's Essential Commodity Index dips 0.4%, vegetable prices witnesses sharp fall

Price Trends: The Bank of Baroda's (BoB's) Essential Commodity Index (ECI) has fallen by 0.4 per cent in December previous year, on a sequential basis, marking the first drop since September 2023. 

Correction in vegetable prices, seasonal drop in prices and arrival of fresh crops in the harvest month have all contributed to a favourable outlook for inflation. The drop in prices has been broad based with items such as pulses, edible oil, tea and sugar, all showing moderation.

The annual number is a bit charred by an unfavourable base, as the Vadodara-based bank expected headline CPI to settle at 5.5 per cent during December last year.

Early on this year, the drop in inflation is likely to be more pronounced, which is already visible in major high frequency price data of January 2024, Bank of Baroda said. 

On a month-over-month (MoM) basis, BoB ECI fell by 0.4 per cent in December last year from an 1.8 per cent increase seen in November 2023. 

The 16 out of 20 commodities which are captured in the index have registered a decline in December 2023 as compared to November 2023. 

Sharp decline in vegetable prices

Onion prices have fallen by 14.8 per cent in December 2023 from a 56.2 per cent increase in November 2023, on MoM basis. A similar trend was witnessed in tomato and potato prices which fell by 4.8 per cent and 4.4 per cent, respectively. 

Other commodities where prices have inched down are all items of pulses, edible oil, tea, sugar and milk, however, seasonally on an adjusted basis, it has risen slightly by 0.9 per cent in November last year.

Annually, BoB ECI registered a growth rate of 4.2 per cent in December previous year. 

Notably, the 7 out of 20 commodities that have registered softening of prices includes edible oil, potato, masur and wheat, while unfavourable base affected prices of other vegetables such as tomato and onion.

For the first 4 days of January this year, BoB's ECI dipped 1 per cent on a MoM basis and 3.9 per cent annually.

The sequential correction was visible in the prices of rice, wheat, pulses, and most importantly for major vegetables- onion, tomato and potato.