Inflation at new 5-year low of 3.02%

The wholesale price index based annual inflation rate hit a new five-year low at 3.02% for the week ended October 20, as compared with 3.07% in the previous week. The decline is mainly due to the higher base effect. WPI inflation rate during the same week last year stood at 5.61%.

The government also upwardly revised the inflation rate for the week ended August 25 to 3.94%, as against 3.79% reported earlier.

The Reserve Bank of India, in its recent mid-term review of monetary policy, set a target to contain inflation close to 5 % during 2007-08, and to around 3% in the medium-term.

"Inflation is down because we have taken steps on the monetary side. We will continue to watch inflation," Finance minister P Chidambaram said today, adding that consumer prices-based inflation (CPI-UNME) was also down by 80 basis points in September over the previous month.

Analysts feel the risk of higher inflation still remains, mainly due to the spiralling crude oil prices. "Though inflation has subsided due to various steps taken by the government and the RBI, the risks to inflation still remain due to high crude oil prices, increasing global commodity prices and declining impact of the base effect," Arun Kaul, GM (Treasury), Punjab National Bank said.

In the week under review, while prices of some food items like maize, arhar, masur and wheat moved up during the week, the prices of some others like bajra and urad soyabean, groundnut declined. Among manufactured food items, prices of groundnut oil, gur, atta, maida declined. However, the price of imported edible oil increased.

Apart from chemicals and chemical products, prices of other manufactured products like textiles, metal products, transport equipment saw an increase in prices for the week under review.