Food inflation, which is basically the index of all food items in the CPI basket, has been on a consistent downtrend. The bumper Kharif output last year led to record pulses output and the glut was largely responsible for the falling food inflation. The food inflation has been on a consistent downtrend and slipped into negative territory in the month of May 2017. In fact, food inflation in the month of May 2017 touched a five year low. The chart below captures the food inflation trajectory over the last one year.

1.  Weak food inflation means weak farm prices


2.  Farmer distress could translate into loan waivers creating problems for banks.


3.  Don't forget the sacrifice ratio


4.  Remember the case of Japan; low inflation can dip into deflation


5.  Weak food inflation will mean weak rural demand
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