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Thursday, January 15, 2009

Inflation ease further at 5.24%

Give leverage to focus on growth

The official Wholesale Price Index for 'All Commodities' (Base: 1993-94 = 100) for the week ended 3rd January 2009 declined by 0.2 % to 229.0 from 229.5 for the previous week.

The annual rate of inflation, calculated on point-to-point basis, stood at 5.24 % for the week ended 3 January 2009 as compared to 5.91 % for the previous week) and 4.26 % during the corresponding week of the previous year.

The rate of inflation, based on average monthly WPI, which was 8.66 % for the month of November, 2008, has eased by 2.19 %age points to 6.47 % in December, 2008.

The movement of the index for the various commodity groups is summarized below: -

PRIMARY ARTICLES (Weight 22.02%) - The index for this major group declined by 0.5 % to 246.3 from 247.5 for the previous week. The groups and items for which the index showed variations during the week are as follows: -

The index for 'Food Articles' group declined by 0.6 % to 239.4 (Provisional) from 240.8 (Provisional) for the previous week due to lower prices of fruits & vegetables (3%) and gram, barley and condiments & spices (1% each). However, the prices of masur (2%) and jowar, tea, urad, moong and rice (1% each) moved up.

The index for 'Non-Food Articles' group declined by 0.4 % to 235.1 (Provisional) from 236.0 (Provisional) for the previous week due to lower prices of groundnut seed (2%) and linseed, raw cotton, castor seed and copra (1% each). However, the prices of raw rubber (5%) and sunflower (2%) moved up.

The annual rate of inflation, calculated on point-to-point basis, for 'Primary Articles' stood at 10.85 % for the week ended 3 January 2009 as compared to 11.59 % in the previous week. It was 4.12 % as on 05 January 2008 i.e. a year ago.

FUEL, POWER, LIGHT & LUBRICANTS (Weight 14.23%) - The index for this major group declined by 0.2 % to 329.8 from 330.5 for the previous week due to lower prices of bitumen (9%), aviation turbine fuel (8%) and light diesel oil (3%). However, the prices of naphtha (3%) moved up.

MANUFACTURED PRODUCTS (Weight 63.75%) - The index for this major group declined by 0.1 % to 200.6 from 200.8 for the previous week. The groups and items for which the index showed variations during the week are as follows: -

The index for 'Food Products' group rose by 0.9 % to 201.9 from 200.1 for the previous week due to higher prices of imported edible oil (5%), oil cakes (4%), salt (2%) and rice bran oil, sugar (1% each). However, the prices of coconut oil (3%) and groundnut oil (1%) declined.

The index for 'Paper & Paper Products' group declined by 0.4 % to 205.0 from 205.9 for the previous week due to lower prices of newsprint (4%).

The index for 'Chemicals & Chemical Products' group declined by 1.2 % to 214.6 from 217.2 (Provisional) for the previous week due to lower prices of acid (all kinds) (24%), synthetic rubber (18%), resins (all kinds) (3%), bopp film and calcium ammonium nitrate n-content (2% each) and soda ash (sodium carbonate) (1%).

The index for 'Basic Metals Alloys & Metal Products' group declined by 0.3 % to 276.6 from 277.5 for the previous week due to lower prices of brass sheets & strips (41%), ferro silicon (14%), lead ingots (7%), basic pig iron and foundary pig iron (2% each) and other iron steel and steel sheets, plates & strips (1% each). However, the prices of zinc ingots (4%) moved up.

The index for 'Machinery & Machine Tools' group rose by 0.5 % to 176.3) from 175.5 (Provisional) for the previous week due to higher prices of electronic ic's (42%). However, the prices of hydraulic machine (4%), semi conductors (2%) and other electrical equipment & systems and hydraulic pumps (1% each) declined.

Outlook - The plunge in wholesale price index (WPI) to 5.24% for week ended 3 January 2009 mainly because of fall in manufacture and primary index, which carries higher weight in WPI. At the same time constant fall in fuel, power index give supportive hand to sink inflation. Inflation is now well within the Reserve Bank of India's forecast of around 7 % for 2008/09, which gives relief to policymakers to focus more towards the growth prospective. Constant and sharp fall in inflation drive mainly by global commodity, crude oil prices. Therefore steady fall in these prices will result further plunge in inflation.

source: Capital Market

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