labels: economy - general
Wholesale inflation index at five-year low of 3.07 per centnews
19 October 2007
Mumbai: Cheaper fruits and vegetables, as well as some manufactured items, pulled India''s wholesale inflation index to a five-year low of 3.07 per cent for the week ended 6 October, from 3.26 per cent the previous week. It was the lowest annual rise since 19 October 2002, when the inflation rate stood at 3.01 per cent, official data showed.

However, analysts said it would not result in a softer monetary policy. The wholesale price index stood at 5.36 per cent in the corresponding week last year.

The Reserve Bank of India (RBI) has said that inflation has been way below its projection of 5 per cent for this fiscal, and below even its target of 4 to 4.5 per cent in the medium term. However, inflation risks remain because of high global oil prices, it said. Global crude oil prices are at around a record high of $88 a barrel.

The fall in the inflation rate has fuelled expectations that the RBI could reduce interest rates in its half-yearly monetary review due on 30 October. However, in the given scenario, there is very little possibility of the RBI lowering benchmark rates.

During the week, fruits and vegetable prices dipped by 4 per cent, eggs and fish-marine fell marginally by 1 per cent, while bajra and maize declined by 2 per cent each. Among manufactured items, prices of oil cakes and gur (jaggery) declined marginally by 1 per cent each.

The index for primary articles group stood 0.8 per cent lower at 224.7 against 226.4 points the previous week. The index for fuel and power remained unchanged at 322.1 points while the index for manufactured products stood 0.1 per cent lower at 187.2.

Food articles were cheaper at 223.8 points (-0.9 per cent) and manufactured food products were lower at 189.1 points (-0.1 per cent). Edible oils were dearer at 171.8 points (+0.5 per cent); fruits and vegetables turned cheaper at 251.2 points (-3.8 per cent) and cereals were lower at 211.3 points (-0.1 per cent) while cement prices were unchanged at 216.2 points.

Analysts, however, said supply-side pressures remained, pointing to high prices of food grains, metals and crude oil.

Global food grain prices are high and crude is touching $90 a barrel.

The inflation rate has been below 5.0 per cent - the Reserve Bank''s projection for the fiscal year ending in March 2008 - for the 18th week now. Inflation has now held below 4 per cent for eight straight weeks.

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Wholesale inflation index at five-year low of 3.07 per cent