Inflation declines to a 2-yr low of 3.35%

Govt watching the price movement of sugar, steel, cement, rice and wheat, says FM.

Finance Minister P Chidambaram today said the government was closely watching the price movement of sugar, steel, cement, rice and wheat, even as the wholesale price index (WPI)-based inflation fell to a two-and-a-half year low of 3.35 per cent, during the week-ended August 6.

The inflation, a measure of the general price level, was 3.84 per cent in the previous week and 8.3 per cent in the corresponding week last year.

The fall in inflation was mainly owing to the high-base effect of last year, when it had crossed 8 per cent in August 2004, and because of a fall in prices of primary articles.

The high-base effect was expected to keep inflation low, till the end of the month. It was also widely expected to go below 3 per cent in end-August, minus a fuel price hike by then. October onwards, inflation could start rising and was expected to go up to 5 per cent by end-December.

"Inflation was down mainly owing to good supply side management and the Reserve Bank of India's adroit management of money supply," Chidambaram told reporters.

A change in interest rates was not expected in the medium term, though high international crude oil prices were affecting the balance sheets of the oil companies and their investment plans, he added.

The inflation rate for the week ended June 11 was revised upwards to 4.5 per cent, against 4.33 per cent reported earlier, based on the provisional estimates.

At a disaggregated level, the index for primary articles fell by 0.8 per cent, due to a 9 per cent fall in vegetable prices and a 6 per cent drop in marine fish prices during the week. Within the primary articles group, index for food articles was down by one per cent due to a fall in prices of vegetables and marine fish.

The index for non-food articles declined by 0.2 per cent owing to a 5 per cent fall in the prices of raw rubber and 2 per cent fall in prices of fodder, gingelly seed and raw wool.

The index for the group of "fuel, power, light and lubricants" fell 0.2 per cent during the week, due to a 5 per cent fall in the prices of furnace oil and despite a 1 per cent rise in naptha prices over the week.

Manufactured items index remained unchanged despite a dip in the indices for food products, rubber and plastic products and non-metallic minerals. The indices for chemicals, chemical products, machinery and machine tools rose marginally during the week.

SOUTH-BOUND

THE INDEX: for primary articles fell by 0.8%, mainly due to a 9 per cent fall in the prices of vegetable and a 6% drop in marine fish prices

FOR THE group of "fuel, power, light and lubricants", the index fell 0.2%, while that for manufactured items remained unchanged

NON-FOOD articles' index declined by 0.2% owing to a 5% fall in the prices of raw rubber