The rate of inflation plunged to an 11-year low of 3.45 per cent for the week ended October 25, down 0.52 percentage points from 3.97 per cent in the previous week.
The sharp fall in the wholesale price index is seen as a statistical blip. The prices of primary food articles dipped 0.2 per cent during the week under review, against an increase of 1.8 per cent in the corresponding week of the previous year. Hence, the rate of growth in prices actually declined. The rate of inflation was at 6.44 per cent in the corresponding week last year.
In general, inflation has hit a low trend of 4-5 per cent, compared with the historical average of 7-8 per cent, largely on account of depressed demand, easing of import barriers and tight fiscal targeting by the government.
The fact that demand has not picked up is a cause for worry, V Raghuraman, secretary general of the Associated Chambers of Commerce, told Reuters. Gold prices are down, the stockmarkets are volatile, real estate business is looking down and inventories are piling up ... It seems there is an erosion in public confidence, people are just not ready to buy. They are postponing their purchases, he added.
Prices of primary articles and manufactured products have increased by just 1.95 per cent and 2.79 per cent respectively during the year, compared with an 11.25 per cent increase in fuel, power, light and lubricants.
