Inflation rate, as measured by wholesale price index (WPI), fell sharply to a 10-month low for the week ended December 2008, as slowing demand has pushed down the prices of manufactured products and food articles.
The inflation now stands at 5.91 per cent in the reporting week, as compared with 6.38 per cent in the previous week. It was at 3.83 per cent during the corresponding week last year.
Food inflation fell for the first time in five weeks to 9.95 per cent as compared with 10.52 per cent in the previous week. And also the final estimate of inflation rate is lower than the provisional number for the first time since the beginning of calendar 2008.
Experts say widening gap between provisional and final numbers reflect acceleration in inflation rate, as only a fourth of all data points are captured when the provisional number is released. Likewise, the negative gap reflect falling prices.
“Clearly inflation has declined at a much more rapid pace than what we had anticipated. Though there may be some blips, like the truckers’ strike, it is heading towards 2 per cent by March,” said Abheek Barua, chief economist at HDFC Bank.
The more than expected fall in inflation is likely to fuel demand for more monetary easing by the Reserve Bank of India (RBI), which cut its key interest rate by one percentage point last week.
“The headroom for more fiscal and monetary measures has increased more than what we had anticipated in December,” he added.
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Manufactured products, which has 64 per cent weight in WPI, by 60 basis points to 6.2 per cent in the reported week, compared with 6.8 per cent in the third week of December. One basis point is one-hundredth of a percentage point.
Rate of inflation for primary articles declined to 11.6 per cent as compared with 12.1 per cent in the previous week. Fuel and power category remained unchanged in the fourth week of December.
Despite the fall in prices of primary articles, this category contributed 40 per cent to the wholesale inflation. Food inflation, which is part of primary articles group, fell to 9.95 per cent as compared with 10.52 per cent in the previous week.