Continuously marching southward, inflation slipped to over six and half year low to 3.03% for the week ended for February 21. With this, it is estimated that the rate of inflation can reach to zero level by the end of this fiscal while in April and May, there are many chances of deflation – the critical situation in which the prices of the consumers goods decline due to lack of money flow.
According to the latest report of Wholesale Price Index (WPI), the annual rate of inflation calculated on point-to-point basis reaches to 3.03% for the week ended for Feb 21 from 3.36% for the week ended for Feb 14. Last year in the corresponding week, it was at 5.69 %. This is the lowest index since August 10, 2002.
This uneven declination may raise scope for Reserve Bank of India (RBI) to further lighten in its monetary policy. Last year, RBI had adopted tough measures to tighten the spiraling inflation. In its effort, the rate of growth became slower which was growing by over 9% last year until the global turmoil hit India.
Yesterday, to boost the economic growth that is growing at a 5-year low 5.3%, RBI has announced fifth round cut in repo rate and reverse repo rate by 0.50% by giving strong signal to further rate cut soon in this fiscal.
Despite the decline trend in WPI data, the prices of essential commodities are still skyrocketing to 10-years high. But RBI has indicated that soon the prices of essential commodities will slow down due to government’s and RBI’s recent measures.
The Centre has recently released the third stimulus package to support the industries by easing duty and service tax by 2% each, whose impact can be seen in the coming WPI reports, experts assume.
Among raw food grains, masur, tea and fruits & vegetables, bajra, jowar and gram became cheaper while the prices of prices of maize and arhar went up.
In manufactured food product, sugar and ghee turned a bit costlier while cotton seed oil, imported edible oil, oil cakes and salt and rape & mustard oil became cheaper.
Among other manufactured products, the prices of metal alloys and metal product moved down whereas electrical equipment & systems and power driven pumps became expensive by 2% each.
The annual rate of inflation calculated on point-to-point basis for the final wholesale price index stood at 5.86% as against previous report on January 09, 2009 vide press note.
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