Business Standard

Inflation falls to 12.34% as food prices moderate

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BS Reporter New Delhi

The wholesale price index (WPI)-based inflation rate declined for the second consecutive week to 12.34 per cent for the week ended 23 August, as prices of food items like rice and pulses fell.

The final index number for the week ended 28 June reveals that wholesale inflation had crossed 12 per cent to reach 12.03 per cent, as against the provisional figure of 11.89 per cent.

The inflation figure had reached a sixteen-year high of 12.63 per cent two weeks back mainly because of surging crude prices. But, in the last five to six weeks, international crude prices have fell by nearly $40 per barrel to reach $ 106 per barrel on last Monday.

 

“The drop in fuel price will be reflected in the inflation numbers in the next few weeks, but Indian rupee has also depreciated,” said DK Joshi, chief economist at Crisil, a rating and research agency. Depreciation of rupee will make imports costlier.

Inflation of 30 essential commodities tracked closely by the government declined to 6.9 per cent in the week ended August 23, as against 7.24 per cent reported a week earlier.

“Decline in the prices of rice, most of the pulses and mustard oil resulted in moderation of inflation rate for essential commodities,” a finance ministry statement said.

The inflation of primary articles group, which accounts for around one-fifth of the WPI index, fell to 10.79 per cent in the week ending August 23 as compared with 11.63 per cent a week ago. On a week-on-week basis, fish-marine fell sharply by 13 per cent, and fruit and vegetables declined by 2 per cent.

Fuel and power, which contains 19 commodities, remained unchanged on a week-on-week basis, but recent fall in international crude prices is likely to be reflected in market-determined oil products in the coming weeks.

However, the rate of inflation in ‘manufactured products’ increased to 11.28 per cent from 11.02 per in the week ended August 16. Prices of products like sugar, imported edible oil, newsprint and white printing paper increased in the reported week.

With inflation still way above central bank’s comfort zone of around 5 per cent, Joshi said he expected not more than one round of tightening as demand in the economy is still strong.

The Reserve Bank of India (RBI) has already increased the key lending rate to commercial banks (repo rate) at 9 per cent, and any further increase in rate is feared by interest sensitive sectors like real estate and banking.

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First Published: Sep 05 2008 | 12:00 AM IST

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