The Hindu Business Line : Cheaper manufactured items keep inflation rate unchanged

Holding steady
The inflation level during the latest reported week is much lower than the level projected by the RBI.
A high base effect also led to a fall in inflation in manufactured products.

New Delhi, July 20 The annual wholesale price index-based inflation rate held steady during the first week of July, strengthening expectations that the RBI might leave interest rates unchanged at the forthcoming policy review on July 31.

The WPI rose 4.27 per cent during the week ended July 7, matching the annual rise witnessed during the previous week, with a dip in inflation in the manufactured products and fuels group items balancing out a spurt in price levels in case of the Primary Articles’ group.

The index ended the latest reported week at 212.6 points, up marginally from 212.5 points during the previous week.

Inflation stood at 4.83 per cent during the corresponding week of last year.

On a disaggregated basis, inflation in case of the Primary Articles’ index, after falling from 12.41 per cent on April 14 to a 41-week low of 6.75 per cent on June 16, again went up to 9.51 per cent during the latest reported week.

Fuel Group

Inflation in the fuel group, however, dipped further to a negative 1.44 per cent in the week ended July 7, after remaining at a negative 1.35 per cent during the preceding three weeks. This was the lowest inflation in the fuel group witnessed since February 6, 1999. The fall in inflation in the fuel group was mainly on account of the high base during the corresponding week of the previous year.

Headline Inflation

A high base effect also led to a fall in inflation in manufactured products. Inflation in manufactured products dropped to 4.51 per cent, from 4.76 per cent in the week ended June 30.

“We expect inflation to come down again in the coming months on account of the higher base in case of primary articles, which are the prime culprit for the rise in headline inflation currently and the manufactured products, which have the largest share of 63.75 per cent in the WPI,” according to CMIE.

The inflation level during the latest reported week 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.

Inflation for the week ended May 12, was revised to 5.62 per cent compared with the provisional figure of 5.27 per cent. This was done as WPI for the week stood at 212.4 points against the provisional figure of 211.7 points.