Inflation at 3-year low, dips to 3.13%

Inflation based on the wholesale price index fell to a three-year low of 3.13 per cent for the week ended August 12, down from 3.35 per cent the previous week.

The low levels were on account of the high base effect. Wholesale price index-based inflation was 8.29 per cent in the corresponding week last year.

The low levels are, however, not expected to continue. This is because oil prices are likely to be hiked soon.

Finance Minister P Chidambaram, Petroleum Minister Mani Shankar Aiyar, Planning Commission Deputy Chairman Montek Singh Ahluwalia, and Chairman of Economic Advisory Council, have all made a case for another round of price hike, considering the possibility of international oil prices continuing to remain high.

"International oil prices will continue to remain high. There is a need to find ways to absorb this hike," said Rangarajan today. He was speaking on the sidelines of a book release function.

While expressing concern on international prices, Chief Economic Advisor Ashok Lahiri indicated that inflation might not be affected to a great extent, even if domestic fuel prices were hiked in due course.

"If you look at the weighting given to petroleum products in the WPI, it is less than 3 per cent," he said.

However, the cascading effect of higher diesel prices on essential items is also a danger point. Inflation is expected to rise to 5 per cent by December end.

The final WPI-based inflation for the week ended June 14 was 4.1 per cent, the same as reported on the basis of the provisional index.

At the desegregated level, the index for primary articles rose 0.2 per cent, and within this, food articles index rose 0.7 per cent on account of a 3.3 per cent rise in vegetable prices.

The index for non-food articles fell 0.2 per cent while that for minerals fell 8.5 per cent due to a 54 per cent dip in chromite prices, and 44 per cent cut in bauxite prices.

The index for fuel, power, light and lubricants remained unchanged, while that for manufactured products fell 0.1 per cent during the week.