The Hindu Business Line : Inflation rate dips as primary items turn cheaper

Containing prices
The annual inflation rate during the latest reported week was the lowest since July 29, 2006.
According to CMIE, various factors are expected to keep inflation at lower in the coming months.

New Delhi June 8 The annual wholesale price index-based inflation rose 4.85 per cent during the week ended May 26, lower than the previous week's annual increase of 5.06 per cent, according to data released by the Ministry of Commerce and Industry.

The easing of the supply constraints in case of certain commodities, especially primary articles, led to the decline in the inflation rate, the high base during the corresponding week, the previous year also contributed to the fall.

The annual inflation rate during the latest reported week was the lowest since the week ended July 29, 2006, when the rate stood at 4.72 per cent. The inflation rate was measured at 4.99 per cent during the corresponding week of the previous year.

The Wholesale Prices Index of all commodities declined 0.1 percentage points to 211.7 points.

Pricing Power

According to CMIE, the high base effect in the coming months, comfortable reservoir levels, expectations of normal monsoon, slower year-on-year increase expected in prices of steel, cement and reducing pricing power in the hands of certain industries such as textiles due to the appreciating Rupee vis-a-vis the Dollar is expected to keep inflation at low levels in the coming months.

Rising Steadily

Incidentally, the current inflation level is lower than the RBI's target for the fiscal. The central bank plans 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. Inflation had started rising steadily since August 2006 and had scaled to a two-year high of 6.69 per cent on January 27 this year.

Inflation levels, however, started coming down from the mid of April 2007.

During the latest reported week, inflation in the primary articles' group declined to 8.62 per cent, from 9.35 per cent in the week ended May 19. The major contributors to this fall were fruits and vegetables, condiments and spices and oilseeds.

Inflation in manufactured products also came down a tad to 5.14 per cent, from 5.20 per cent in the preceding week, on account of lower inflation in manufactured food products, machinery and transport equipments and parts.

WPI numbers

Inflation in the fuel group remained unchanged, after dipping to an eight-year low of 0.5 per cent in the week ended May 19.

Annual inflation for the week ended April 13, was revised to 5.94 per cent compared to the provisional figure of 5.74 per cent.

This was done as final WPI numbers for the week were revised to 210.4 points against the provisional figure of 210 points, the release said.