The Hindu Business Line : Inflation rate eases to 10-month low as primary items' prices fall

At a glance
Deceleration in rise in oilseeds prices contributed fall in primary articles prices.
Manufactured products were unchanged, while fuel group rose marginally.
Comfortable reservoir levels, healthy crop outlook with keep inflation down.

New Delhi June 15 The annual wholesale price index-based inflation rate eased to 4.80 per cent during the week ended June 2, lower than the preceding week's annual rise of 4.85 per cent.

The decline in the year-on-year inflation rate, the lowest since the week ended July 29 last year, was mainly due to a decline in prices of Primary Articles.

The WPI ended the latest reported week at 211.9 points. Inflation was at 4.88 per cent during the corresponding week last year.

Inflation had started rising steadily since August 2007 and had risen to a two-year high of 6.69 per cent on January 27. But, it started coming down from the middle of April 2007. At its present levels, inflation is ruling very much around the levels projected by the RBI for the current fiscal.

The RBI has a target to contain inflation at close to 5 per cent during 2007-08 and bring it down to 4.0-4.5 per cent over the medium term.

Foodgrains

In case of the Primary Articles' group, inflation declined further to 8.20 per cent from 8.62 per cent in the week ended May 26, with prices of foodgrains stagnating and that of fruits and vegetables, meat, eggs and fish and milk coming down.

The deceleration in the rise in prices of oilseeds also contributed to this fall in inflation in primary articles.

Inflation in primary articles started cooling off since mid-April 2007 from its high levels of above 12 per cent because of the easing of supply constraints in case of certain commodities and the high base last year.

Manufactured products

Inflation in manufactured products almost remained unchanged at 5.13 per cent, compared to 5.14 per cent during the previous week. Inflation in the fuel group, on the other hand, rose a tad to 0.56 per cent from its eight-year low of 0.50 per cent in the preceding two weeks.

Inflation for the week ended April 7 was revised to 6.44 per cent compared to the provisional figure of 6.09 per cent. This was done as WPI for the week stood revised at 211.5 points against the provisional figure of 210.8 points.

Outlook

According to the CMIE, inflation is expected to come down in the coming months. "The higher base, comfortable reservoir levels, expectations of healthy agricultural crop, slower year-on-year increase expected in prices of steel, cement and reducing pricing power in the hands of certain industries such as textiles in lieu of the appreciating rupee versus the dollar, are expected to play a role in keeping inflation at these low levels," the CMIE said in response to the latest inflation numbers. Data earlier this week showed industrial production grew at an expectedly strong annual rate of 13.6 per cent in April, raising apprehensions of the RBI stepping in to tighten policy in coming months. The RBI's next review is scheduled for July 31.