Inflation drops to 3.26%

Even though prices of major articles like fruits and vegetables, egg, fish, gur and soyabean oil continued to rise, the wholesale price index-based rate of inflation declined to 3.26% for the week ended September 29 as against 3.42% in the same week last year.

The decline could be attributed to the higher prices of commodities last year when inflation was recorded at 5.41%.

WPI inflation for the week ended August 17 was revised to 4.39%, as compared with 4.05% reported earlier.

The index for the major group of manufactured products, which bears a weightage of 63.75% in the WPI basket, rose 0.1% during the week due to increase in prices of food products, chemical products,
mineral products, metal products, machinery and transport equipment. The prices of textiles declined  0.1% though.

"The manufactured items are under demand pressure. With the festive season beginning, the price-rise may continue for some more time," said Shashank Bhide, senior fellow, NCAER.

Analysts said the Reserve Bank of India may not further tighten monetary policy at its forthcoming midterm review this month-end. "I do not expect any major changes in the monetary policy by RBI. After the central bank raised the Market Stabilisation Scheme (MSS) ceiling, it is now less likely that cash reserve ratio will be hiked," Arun Kaul, GM (treasury), Punjab National Bank said.

The government has raised the MSS ceiling by Rs 50,000 crore to Rs 2,00,000 crore, to absorb liquidity as the present limit of Rs 1,50,000 crore was about to be reached. The MSS ceiling had been increased to Rs 1,50,000 crore in August from Rs 1,10,000 crore earlier.