The Hindu Business Line : Inflation continues downward bias

New Delhi, Dec. 26 The annual Wholesale Price Index-based inflation has dipped to a nine-month low of 6.61 per cent for the week ended December 13. This is lower than the previous week’s rise of 6.84 per cent, helped mainly by a recent duty cut on manufactured products and lower energy prices.

However, in the ‘primary articles’ group, the rate of inflation increased to 12.15 per cent, as compared to 11.81 per cent reported last week, mainly due to an increase in iron ore prices.

Inflation almost halved from the peak of 12.91 per cent four months ago as manufactured goods and some food items turned cheaper during the latest reported week. Besides, a cascading effect of cuts in fuel prices in early December also had a dampening effect on the headline inflation, providing more space to the RBI for further cuts in key policy rates.

The government had reduced the central value-added tax on a wide range of manufactured items by four percentage points on December 7 as part of an economic stimulus package for boosting the economy. The Centre had also cut retail prices of petrol by Rs 5 a litre and diesel by Rs 2 a litre on December 6. Commodity group-wise examination of year-on-year inflation shows that inflation in the ‘fuel and power’ group declined to a negative 0.18 per , compared to 0.58 per cent in the previous week, while for manufactured products, the inflation rate decreased to 7.00 per cent (7.32 per cent).

During the latest reported week, the contribution of primary articles to the year-on-year inflation rate showed that this group alone accounted for 41.59 per cent of the overall inflation, as against its share of 22.03 per cent to the WPI basket, while the fuel and power group registered negative contribution.

The rate of growth of prices (the week-on-week inflation rate) of seasonal vegetables, rice, maize, tea and arhar has come down. But it has increased for pulses, other cereals, onions, brinjal, cabbage and fish. Items in the fuel and power group remained stable.

Among the manufactured products, sugar, certain edible oils, steel products and cement show decreased inflation rate, while gur, newspaper, PVC items and imported edible oils increased.