Inflation dips to 7.38%

The Wholesale Price Index (WPI)-based inflation level fell to 7.38 per cent in the week ending September 25, as against 7.8 per cent in the previous week.

The fall in the inflation rate was mainly on account of the high base effect of the previous year's inflation level.

"Three factors have contributed to capping domestic inflation. One is the high base effect, the second is that the spike in prices of fruits and vegetables on account of the initial failure of monsoon and truckers' strike has tapered off, and the third is the fact that the hike in international oil prices has not been passed on to Indian consumers," said DK Joshi, Senior Economist, Crisil.

"A proper dismantling of the administered price mechanism would have offset the base effect," he added.

The inflation rate was 5.39 per cent in the corresponding week last year, up from 5.02 per cent for the week ending September 20, 2003.

The inflation rate based on the final index for the week ending July 31 was 8.02 per cent as against 7.61 per cent reported on the basis of the provisional index.

At the disaggregated level, the index for primary articles fell by 0.6 per cent, while the indices for manufactured products and for fuel remained unchanged at the previous week's levels.

Within the major index of primary articles, the index for food articles fell 0.4 per cent due to a 4 per cent dip in marine fish prices and 2.6 per cent dip in the prices of vegetables.

Prices of non-food articles fell by 1.1 per cent due to a 5 per cent cut in the prices of raw cotton, 4 per cent fall in nigerseed and sunflower prices and 1 per cent fall in prices of groundnut seed, safflower and cotton seed.

Despite rising oil prices in international markets, the fuel, power, light and lubricants' group index remained unchanged at the previous week's level.

Crude prices have touched a record high of 53 dollars a barrel on concerns of supplies from Nigeria and increased winter demand in the west.

A decision on whether domestic prices are to be raised will be taken around October 15. Indications are, however, that prices will not be raised.

The index for manufactured products was also unchanged, despite a 4 per cent dip in the prices of rice bran oil, 5 per cent dip in prices of texturised yarn, 17 per cent fall in cycle tube prices, and a 4 per cent cut in cycle tyre prices.

Prices of polystyrene rose 19 per cent during the week, electric motor prices were up 8 per cent and prices of 2 and 3-wheeler parts and components were up 1 per cent.