Inflation based on the wholesale price index (WPI) declined sharply to a 13-month low of 4.28% for the week ended June 9 from 4.80% in the previous week. The inflation was at 5.29% in the corresponding period of the previous year. Higher comparative prices last year during the same week (base effect) and a decline in prices of primary food articles contributed to lower inflation.Finance Minister P. Chidambaram attributed the fall in inflation to monetary tightening by the Reserve Bank of India, but said it is too early to reach any conclusion on the price situation. "Monetary tightening measures seem to have had an impact. It is too early to draw any conclusion. We need to watch inflation in the next 4-5 weeks," he told reporters today.Analysts agree with Chidambaram's views. "Various measures taken by the RBIand the government have started yielding results. The market, however, remainsconcerned about prices of primary articles," Arun Kaul, general manager (treasury), Punjab National Bank said.The latest decline may ease pressure on the central bank to tighten monetary policies, but a cut in interest rates may also not happen, analysts added. "RBI may not loosen its monetary stance, but there is not much pressure to hike the rates either," Saugata Bhattacharya, vice-president, business and economic research, UTI Bank said."The external condition is not conducive for easing rates as there is a possibility of increase in interest rates in countries like Japan, China and Europe," Kaul added.The central bank, in its annual monetary policy released on April 24, had said it would contain inflation at close to 5% in 2007-08 and moderate it to 4-4.5% in the medium term. RBI is scheduled to review its monetary policy on July 31, 2007.The prices of primary food articles for the week ended June 9 declined 0.3% due to lower prices of moong, fish marine, gram wheat, maize, fruit and vegetables.However, the index for non-food articles group rose 0.3% due to higher prices of sunflower, cotton seed, raw cotton, groundnut seed and soya bean.The index for fuel power, light and lubricants rose marginally by 0.1%. The index for the manufactured products group remained unchanged at its previous week's level.
