The Hindu Business Line : Inflation dips sharply on fuel price cuts

New Delhi, Dec. 18 With the cut in fuel prices earlier this month coming into play, inflation slipped to its lowest in over nine months, even as the Finance Ministry said this could help further ease interest rates in the economy.

The annual Wholesale Price Index (WPI) rose 6.84 per cent during the week ended December 6, sharply below the previous week’s annual rise of 8 per cent, almost entirely on account of the fuels sub-group.

The Rs 5 a litre cut in petrol prices and Rs 2 a litre reduction in diesel on December 6 helped bring down the year-on-year inflation rate in the fuels category to less than one per cent (0.58 per cent) for the latest reported week, as against the annual inflation rate of 4.48 per cent during the previous week. The Mineral oils group witnessed a contraction in the inflation rate by 1.20 per cent.

The Manufactured Products group also continued its declining trend and showed a dip in year-on-year inflation levels to 7.31 per cent during the latest reported week, from the previous week’s 7.86 per cent.

Bucking the trend, the inflation in the Primary Articles group climbed to 11.80 per cent during the latest week, up from 11.66 per cent annual rise during the previous reported week. Inflation in the food articles group was recorded at 10.19 per cent, with prices of cereals, pulses, fruits and vegetables, milk, and spices continuing to stay at high levels.

Responding to the dip, Secretary, Department of Economic Affairs, Mr Ashok Chawla said, “The trend is clear for falling inflation and this will translate into lower interest rate...RBI must be keeping a watch and take steps if necessary.”

The contribution of the commodity groups to the year-on-year inflation rate for the week ending December 6 showed that Primary Articles, covering food, non-food and minerals, accounted for 39.14 per cent of inflation, which is 17 percentage points more than their contribution to the WPI basket. The fuel and power group, with a share of 14 per cent in the WPI basket, accounted only for 1.83 per cent of inflation for the latest week.

Items showing decline in the week-on-week inflation rate included cauliflower, cabbage, black pepper, cardamoms, most pulses, tea and wheat. In the fuel and power group, all mineral oil products show a decline in the weekly inflation rate.