Inflation dips to 5.55%

Inflation, a measure of the general price level in the economy, continued to slide for the third consecutive week, from 5.61 per cent in the previous week to 5.55 per cent in the week ended May 14.

The decline in inflation is because of the high base effect of the previous year. The wholesale price index (WPI)-based inflation had started rising by this time last year and had touched 8 per cent in August 2004.

"Inflation seems to have stabilised in the 5-6 per cent range. The government seems to be in no mood to raise fuel prices and is controlling inflation from the money supply side. There is very little that can be done about international crude oil prices, but they are postponing the transmission effect into the domestic economy," said DK Joshi, senior economist, Crisil.

He added that fuel prices would largely determine how inflation moved.

The dip in the WPI-based inflation was seen despite a hike in the prices of meat and minerals as compared with the previous week.

Inflation in the corresponding week last year was 4.96 per cent. The final WPI-based inflation for the week ending March 19 was revised upwards to 5.45 per cent against 5.11 per cent reported on the basis of the provisional index.

At a disaggregated level, inflation for the index of primary articles rose by 0.3 per cent through the week, while that for fuel, power, light and lubricants rose marginally.

The index for a major group of manufactured products, which accounts for almost 64 per cent of the WPI, remained unchanged at the previous week's level.

Within the group of primary articles, the index for minerals rose by 1.3 per cent owing to a 49 per cent hike in felspar prices, 13 per cent hike in magnesite prices, 11 per cent rise in price of barytes and a 2 per cent rise in iron ore prices.

The prices of fireclay, however, fell by 25 per cent, and those of ochre, were down 14 per cent compared with the previous week.

The index for food articles rose by 0.4 per cent, mainly because of a steep 13 per cent rise in beef and buffalo meat prices, 8 per cent rise in poultry chicken prices, 8 per cent rise in masur prices and a 3 per cent hike in the prices of eggs .

The index for manufactured products remained unchanged at the previous week's level. Within the group, however, the index for food products, machinery and machine tools, and transport equipment and parts, rose. The index for textiles, non-metallic mineral products and basic metals fell during the week.