The Hindu Business Line : Inflation rate down to 4.28% on cheaper food items

At new low
The fuel group dropped to a negative 1.23%
Manufacturing products increased marginally to 5.25%
Inflation may remain low in the coming months

New Delhi June 22 The annual wholesale price index-based inflation rose 4.28 per cent during the week ended June 9, lower than the previous week's increase of 4.80 per cent.

The sharp drop in the year-on-year inflation level during the latest reported week — a 58-week low — was mainly on account of a fall in prices of primary articles and fuel items, according to data released by the Ministry of Commerce and Industry here.

Compared to the corresponding period a year ago, headline inflation declined by more than a percentage point during the latest reported week. Inflation was measured at 5.29 per cent in the week ended June 10 last year.

Inflation in the case of the primary articles' group continued to fall for the fifth consecutive month, while that in the fuel group slipped into the negative zone. Lower inflation in foodgrains, fruits and vegetables, eggs, meat and fish and some other food articles pulled down the overall inflation in the case of primary articles to 7.58 per cent, from 8.20 per cent during the preceding week.

Inflation in the fuel group dropped to a negative 1.23 per cent, from 0.56 per cent in the week ended June 2. This is the lowest inflation in the fuel group since February 6, 1999, according to the Centre for Monitoring Indian Economy (CMIE). The negative inflation came mainly on account of the high base-effect. The Union Government had hiked the retail prices of petrol and diesel in June 2006, which were subsequently cut in February and March 2007. Hence, the current prices of these products are ruling below their year-ago levels, causing negative inflation in the fuel group.

Manufacturing products

Inflation in manufacturing products, the largest contributor to the headline inflation, increased marginally to 5.25 per cent, from 5.13 per cent during the previous week, with textiles and chemicals among the items showing increase in prices.

Inflation in categories such as food products, rubber and plastic products, non-metallic minerals, metals and machinery, however, came down during the week.

The current headline inflation is much lower than the level projected by the RBI for the fiscal.

The RBI has a target to contain inflation at close to 5 per cent during 2007-08 and bring it down to 4-4.5 per cent over the medium term.

According to CMIE, inflation is expected to remain low 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 are expected to play a role in keeping inflation at these low levels," it said.

Inflation for the week ended April 14, was revised to 6.34 per cent as compared to the provisional figure of 6.09 per cent.

This was done as WPI for the week stood revised at 211.4 points against the provisional figure of 210.9 points.