Inflation dips below 5%-mark after 10 months

Inflation, based on the rise in the wholesale price index, fell to 4.85% for the week ended May 26 as against 5.06% in the week before. The inflation rate has dropped below the 5%-mark after a gap of 10 months.

The decline in the inflation rate is attributed to a combination of
factors - a fall in prices of essential food items like pulses, fruits and
vegetables and the higher base of the wholesale price index at the same
time in 2006. The inflation rate at around the same time last year was
4.99%.

The Reserve Bank of India has set an inflation target of 5% for
this financial year. Even though the inflation rate is under control,
continued rise of liquidity in the system because of RBI's purchase of dollar keeps the possibility of some intervention by the central bank alive.