Headline inflation rate, as measured by the wholesale price index (WPI) after showing marginal increase for two consecutive weeks fell further into the negative territory to -1.54 per cent for the week ended July 18. The decline is primarily due to the decrease in prices of fuel and manufactured products.
The inflation rate was -1.17 per cent for the previous week ended July 11 and 12.54 per cent for the corresponding week in 2008.
“I would not read too much in the decrease in prices of manufactured products. There has not been a dramatic change in trend as commodity prices continue to soar and will build up inflationary pressures .
The inflation rate has bottomed out and policy rate cuts would not be a possibility,” said Jyotinder Kaur, economist with HDFC Bank.
The RBI has estimated the average inflation rate for 2009-10 to be at 5 per cent while stating that inflationary pressures will build up around October 2009 as the base effect wears off. “The RBI projection of 5 per cent is under stated.
We will be looking at around 7 per cent inflation as commodity and fuel prices would exert pressure as the base effect dies down. Monetary policy will also have to be adjusted accordingly,” added Kaur.
The rate of rise in prices of oil and fuel products declined by 53 basis points on an annual basis to stand at -10.57 per cent while prices of manufactured products fell by 43 basis points to -0.48 per cent.
Minerals registered a major decline as prices fell by 16.8 per cent in the week under consideration as iron ore prices softened by 24 per cent and feldspar by 3 per cent. Jet fuel prices also declined by 7 per cent during the week.
NO RELIEF FOR COMMON MAN AS FOOD PRICES SOAR:
Even as the inflation rate has fallen for the week, the prices of primary articles especially food items which comprise the essential consumption basket continue to soar providing no relief to the common man.
The inflation rate of primary articles did see a marginal drop of 20 basis points to stand at 4.7 per cent on an annual basis; however prices rose by 30 basis points on a week-on- week basis.
“The food prices have continued to be a worry and the problem seems to be at the distribution side given the Rabi production was good. The problems of distribution have not yet been addressed and will add to inflationary pressures in the coming weeks,” Kaur added.
The inflation rate of cereals and pulses continued to be in double digits and registered a week-on-week increase of 0.1 per cent and 4.2 per cent respectively at 10.9 per cent and 16.9 per cent. The prices of other food items like mutton rose by 14 per cent, arhar by 9 per cent, gram by 4 per cent, fruits and vegetables by 2 per cent from the previous week.
Sugar continued to be expensive with an inflation rate of 33.12 per cent, and registered a 0.8 per cent increase in prices from the previous week.
The final rate of inflation for the week ended May 23 was revised upwards to 1.34 per cent as compared to an earlier provisional estimate of 0.48 per cent.
