The headline inflation rate for the week ended April 18 this year went up because of a rise in prices of primary articles, especially food items.
The wholesale price index (WPI)-based inflation rate inched up to 0.57 per cent in the reported week, compared with 0.26 per cent in the previous week. The inflation rate was 8.23 per cent in the corresponding week in 2008.
Experts, who had earlier predicted that the inflation rate would touch the negative territory by the end of this month, are now rethinking because of two consecutive weeks of overall price increases, mainly due to primary articles.
“We expected the rise of primary articles to be a result of temporary supply shock, but the index points to a deeper demand-supply mismatch,” said Abheek Barua, chief economist with HDFC Bank.
The prices of commonly consumed articles like cereals, pulses and sugar continue to be high. The inflation rate of pulses saw a year-on-year rise of nearly 4 percentage points to 12.6 per cent.
The inflation rate of food and cereals continued to be around 10 per cent.
The inflation rate for primary and manufactured articles stood at 5.7 per cent and 0.94 per cent, respectively, compared with 4.4 per cent and 0.90 per cent in the previous week. Fuel prices also showed a rise of around 0.1 per cent on a week on week basis.
Further rate cuts: With prices remaining firm and early signs of global economy recovering, analysts say any further rate cuts are limited.
“This data support our view that we are very close to the end of the rate cutting cycle and we may see a maximum of 25-30 basis points cuts from present levels, as the economy starts to recover in the second half,” said Shubhada Rao, chief economist at YES Bank in Mumbai.
The Reserve Bank of India (RBI) has only recently cut the repo rate, the rate at which lends to banks, by 0.25 basis points to bring it down to 4.75 per cent. Since September last year, India’s central bank had reduced this key interest rate by 4.25 percentage points.
The final rate of inflation for the week ended February 21, 2009, was revised down to 2.99 per cent from 3.03 per cent, an earlier provisional estimate.
