Inflation declines to 5.7%

Wholesale price index (WPI)-based inflation fell marginally to 5.7 per cent for the week-ended April 30, down from 5.91 per cent in the previous week, mainly because of lower food prices. But the prices of manufactured products, including those of chemicals, food products and metals went up during the week.

For the full year, estimates of inflation vary from the Reserve Bank of India's figure of 5-5.5 per cent to a little over 6 per cent in a worst-case scenario.

"Inflation will not cross 6.2 to 6.3 per cent in the worst-case scenario. Keeping inflation between 5 and 5.5 per cent seems an achievable target. The indications are quite clear that international oil price hikes will not be passed on fully and anyway, the high-base effect of inflation last fiscal will keep the levels down in 2005-06," said DK Joshi, senior economist, Crisil.

"An inflation of 5-5.5 per cent is very achievable," said Ajit Ranade, Economist, Aditya Birla Group. Inflation, a measure of price hikes in the economy, had touched a high of 5.91 in the previous week.

It came down mainly on account of a drop in the prices of primary articles. Inflation was 4.6 per cent in the corresponding week last year.

For the week ended March 5, inflation based on the final index was revised upwards to 5.46 per cent against 5.3 per cent reported earlier on the basis of the provisional index.

"Despite the RBI's efforts, it is expected that inflation will cross 6 per cent in the near future," the Institute of Economic Growth had said recently, adding that the central bank might not hold the bank rate at its current level of 6 per cent for a long time, given the rising international interest rates and inflationary expectations in the economy.

A double-digit rise in the prices of fuel, sugar and iron and steel products had led to the rise in inflation. The hike was, however, artificial as the impact of rise in world oil prices had not been factored into domestic prices, the IEG had said, adding inflation in May, June and July was expected to be 5.77 per cent, 5.92 per cent and 6.15 per cent, respectively.

At the disaggregated level, the index for primary articles fell 0.1 per cent during the week.

Within this broad category, the prices of food articles fell 0.2 per cent on account of a 5 per cent drop in egg prices and a 1 per cent dip in wheat prices. The index for non-food articles, however, rose 0.2 per cent owing to a 4 per cent hike in raw rubber, 2 per cent hike in sunflower and groundnut seed and 1 per cent increase in safflower seed prices.

The index for the major group of fuel, power, light and lubricants remained unchanged during the week, while the index for manufactured products rose 0.2 per cent.

The index for chemicals and chemical products rose 0.7 per cent mainly because of a steep 67 per cent hike in epoxy resin prices and 28 per cent rise in benzene prices. The index for basic metals, alloys and metal products rose 0.2 per cent owing to a 4 per cent hike in the prices of bright bars and 3 per cent rise in utensil prices.

Food products prices rose 0.2 per cent, driven by a 6 per cent rise in oil cake prices, while the indices for non-metallic mineral products and transport equipment and parts rose 0.1 per cent each during the week. The index for machinery and machine tools, however, fell by 0.1 per cent because of a 5 per cent decline in colour television sets.