Inflation at 9 month low

Inflation fell further to 4.83 per cent, the lowest in over nine months, in the week ended February 19 because of falling prices of edible oils, vegetables and some manufactured products.

The wholesale price index-based inflation, a measure of rise in the prices of commodities, was 5.01 per cent in the previous week and 6 per cent in the corresponding week last year.

"The manufacturing inflation is down to 4.2 per cent from 4.5 per cent in the previous week. With supply-side flexibility and lowering of import duties, manufacturing inflation is expected to remain at around 4 per cent in the next fiscal year," said Saumitra Chaudhuri, economic advisor, ICRA.

However, for the next fiscal year, rising energy costs may be a major problem. "International crude oil prices are currently about $5 a barrel higher than what they were in October last year. There is a case for raising the administered prices of petroleum products now, because there is a backlog of adjustments to be made and soon. Further adjustments will be required because of stiff international oil prices," he said.

"The average WPI-based inflation for 2005-06 should be in the range of 5-5.5 per cent," said DK Joshi, senior economist, Crisil.

Inflation may rise in April and May because of the low base effect of last year's inflation. In 2004-05, the government has taken a number of steps, including cutting excise and Customs duties on certain products, raising the cash reserve ratio for banks and allowing additional supply of sugar in the market in order to curb inflation.

Inflation based on the final index for the week ended December 25 was revised to 6.56 per cent against 6.39 per cent reported on the basis of the provisional index.

At the disaggregated level, the index for primary articles rose 0.2 per cent, while that of manufactured products fell 0.1 per cent during the week.

The index for the group of fuel, power, light and lubricants remained unchanged at the previous week's level.

Within the group of primary articles, the food articles group rose 0.2 per cent while that for non-food articles rose 0.4 per cent during the week. Items whose prices rose steeply included coffee (22 per cent) and soybean (5 per cent).

The fall in the index for manufactured products was driven by a decline in the prices of textiles, rubber, basic metals and machinery, while chemicals, non-metallic mineral and transport equipment became costlier.