Inflation eases further, but oil flare up worries FMBS Reporter / New Delhi September 8, 2007A fall in prices of food articles like fruits and vegetables, maize and fish-marine products, led to the wholesale price index based inflation declining to 3.79 % for the week ended August 25, down from 3.94 % in the previous week. This marks the second week in a row when inflation has remained below the 4 % level.The latest data shows that inflation has fallen to a 16-month low. Inflation stood at 3.70 % for the week ended 15 April, 2006.However, the provisional inflation figure of 4.27 % for week ended June 30 has been revised to 4.42 %.Welcoming the latest decline, Finance Minister P. Chidambaram told a news agency that prices of essential food items need to fall further. He added that there is need for caution due to increase in international crude oil prices. "Since crude oil prices are at $ 74 per barrel. So the outlook isof caution," he said.Chidambaram pointed out that prices of essential commodities could only come down if supplies are augmented. "That can only happen if thedemand-supply mismatch is addressed. We have to address the supply side issues of pulses, food, oilseed, and vegetables," he said.Economists also said that fuel prices could reverse the trend. "A part of the current fall in inflation is due to significant increase in prices during the same time last year. For the current year, monsoon has been favourable in many parts of the country. However, any increase in prices of petrol and diesel will have an adverse impact on inflation level. However, apart from that I do not see any upward pressure on inflation," said Shashant Bhide, senior fellow, NCAER.Bhide added that given the current trend, the annual inflation rate for 2007-08 may remain within the RBI
