Inflation, based on the rise in the wholesale price index, fell to 4.85% for the week ended May 26 as against 5.06% in the week before. The inflation rate has dropped below the 5%-mark after a gap of 10 months.The decline in the inflation rate is attributed to a combination offactors - a fall in prices of essential food items like pulses, fruits andvegetables and the higher base of the wholesale price index at the sametime in 2006. The inflation rate at around the same time last year was4.99%.The Reserve Bank of India has set an inflation target of 5% forthis financial year. Even though the inflation rate is under control, continued rise of liquidity in the system because of RBI's purchase of dollar keeps the possibility of some intervention by the central bank alive.
