Inflation declines for 11th consecutive week

The official Wholesale Price Index (WPI) for 'All Commodities' for the week ended August 15 rose by 0.6% to 238.8 from 237.4 for the previous week. The annual rate of inflation, calculated on point to point basis, stood at -0.95% for the week ended Aug. 15 compared to -1.53% for the previous week and 12.82% during the corresponding week of the previous year.

The index for the Primary Articles group rose by 2.1% to 268.4 while the index for Food Articles group was up by 3.2% to 270.3. The index for the Fuel & Power group remained unchanged at its previous week's level of 338.2 and the index for Manufactured Products group rose by 0.1% to 206.4. Inflation rate for all the four indices stood at 7.7%, 13.29%, -10.12% and -0.82%.

For the week ended June 20, the final WPI stood at 235.8 compared to the provisional figure of 234.6. The annual rate of inflation, calculated on point to point basis, stood at -0.8% as against -1.3% reported earlier on July 2.

Inflation may turn positive and then start to accelerate in coming months as a poor monsoon threatens to reduce farm output and stoke food prices. Food costs as reflected in the nation’s consumer-price indexes (CPI) are already increasing at a rapid pace. Consumer prices paid by farm workers jumped 12.9% in July from a year earlier. Prices paid by rural workers rose 12.67% in July. Higher food prices will lead to WPI inflation accelerating to 6% in the fiscal year to March 2010.

The RBI cut benchmark interest rates six times between October 2008 and April 2009 to unprecedented lows. On July 28, the central bank left the reverse-repurchase rate unchanged at 3.25% and kept the repurchase rate at 4.75%. The RBI said it may have to reverse its expansionary measures to subdue inflation.
The RBI last month revised its fiscal year-end inflation forecast to 5% from an earlier estimate of 4%