Inflation in red for 10th straight week; food prices firm

The annual rate of inflation stood at -1.53% for the week ended August 8, 2009 as compared to -1.74% for the previous week ended August 1, 2009, the Commerce & Industry Ministry said. Inflation was at 12.82% during the corresponding period of the last year (week ended Aug. 9, 2009). The Wholesale Price Index for 'All Commodities' for the week ended August 8, 2009 rose by 0.1% to 237.4 from 237.2 for the previous week. The Government announced that it had kept the inflation rate unchanged for the week ended June 13 at -1.14%.

The index for 'Primary Articles' rose by 0.2% to 262.9 while the inflation for this group stood at 5.79% versus 5.17% in the preceding week. The index for 'Food Articles' group rose by 0.2% to 262 from and the corresponding inflation increased to 10.55% from 10.16% in the week ended August 1. The index for 'Non-Food Articles' declined by 0.1% to 241.4 while its inflation rate stood at -1.55% as against -2.74% in the previous week.

The index for 'Fuel, Power & Light' declined marginally to 338.2 from 338.3 in the previous week while the corresponding inflation rate for this group too remained nearly unchanged at -11.09% versus -11.07% in the preceding week.

The index for 'Manufactured Products' group rose by 0.1% to 206.1 and its inflation was at -0.63% compared to -0.77% in the previous week. The index for 'Food Products' group rose by 0.4% to 232.5 while its corresponding inflation stood at 9.62% as against 8.68% in the previous week.

Though inflation, based on the WPI, shrank for the tenth week in a row, the prevailing drought-like conditions continued to push up food prices and could spike further once the high base effect of last year tapers off in the coming months.

The Government will have to pre-empt the impending spike in food prices by clamping down on speculative hoarding by traders and by bolstering local supplies of essential food products. The Centre will have to reply on think out of the box as monetary policy alone cannot tackle supply-side bottlenecks.

At its first quarter policy review last month, the Reserve Bank of India (RBI) revised up its inflation outlook for the fiscal year 2009-10 to 5% from 4%. It left the key policy rate unchanged after having slashed the rate by 425 basis points between October and April.