Mumbai:
The annual rate of inflation based on the wholesale price index (WPI) fell below
the five per cent mark to 4.85 per cent during the week ended May 26, from 5.06
per cent in the previous week, as food items and some manufactured products turned
cheaper. Food
items like fruits and vegetables, barley, urad, bajra, maida and suji turned cheaper
as did some manufactured items like bus chasis, chemicals and some metals. This
is the first time in eight months that the inflation rate fell below the five
per cent level. The decline in inflation rate is also due to base effect of last
year. The rate
of inflation stood at 4.99 per cent during the corresponding week last year. The
decline came much earlier than the government expected. Prime minister Manmohan
Singh had expressed the hope last month that the inflation rate would come down
to 5 per cent in a couple of months. The
Reserve Bank of India aims to keep inflation close to 5 per cent this fiscal,
and bring it down to 4.0-4.5 per cent over the medium term. RBI
has raised interest rates five times since last June and raised banks'' reserve
requirements three times since December to rein in inflation and credit growth,
but held rates steady at a credit policy review in April. The
government, meanwhile, cut petrol and diesel prices to help tame inflation. It
has cut import duty on cement, capital goods, steel, aluminium, copper and other
industrial raw materials, as well as palm and sunflower oil and a string of other
products. However,
increasing demand resulting from a 9.4 per cent economic
growth during 2006-07 could still result in price rise if the supply side does
not grow in proportion, finance minister P Chidambaram said last week.
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