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Thursday, February 12, 2009

Inflation at 4.39%

Moving towards RBI's projection

Fall in all three major contributor i.e. primary articles, manufacturing product and fuel power index resulted into 0.74% declined in index of WPI for the week ended 31 January 2009 compared with a week ago.

The annual rate of inflation, calculated on point-to-point basis, stood at 4.39% for the week ended 31 January 2009 compared to 5.07% for the previous week and 4.74% during the corresponding week of the previous year.

The major contributor, manufacturing product with 64% weighted in total WPI declined by 0.1% compared with previous week. The index of food products, beverages tobacco and tobacco products, paper and paper products machinery and machine tools, transport equipment and parts contributed to the fall in manufacturing product index.

Textile which is major contributor to manufacturing index declined by 0.8% to 140.0 from 141.1 for the previous week due to lower prices of polyster yarn (11%), dhoties, sarees and voils (6%), cotton yarn-cones, cotton yarn-hanks and nylon filament yarn (1% each). However, the prices of cotton grey drills & jeans (3%), cotton grey cloth (others) (2%) and viscose filament yarn (1%) moved up.

However the index of wood and wood product, non-metallic mineral products leather and leather products, chemicals and chemical products marginally increased this time compared to previous week.

Another major contributor in WPI is primary article index, which declined by 0.2%. The fall is attributed to the decline in the index of food article. The index for food articles group declined by 0.3 % to 244.7 from 245.4 for the previous week due to lower prices of condiments and spices and fruits, vegetables and barley and tea. However the index for non-food articles group rose marginally due to higher prices of tobacco and castor seed, niger seed and raw rubber.

The index for fuel, light and lubricants group declined by 3.1% due to lower prices of lignite (21%), petrol (11%), LPG (8%) and high speed diesel oil (7%).

WPI based inflation slowed down to a one- year low after the government cut fuel prices. The government cut domestic petrol prices by Rs. 5 a litre, diesel by Rs. 2 and cooking gas by Rs. 25 per cylinder.

The industrial production again crashed by two per cent in December 2008. Thus the slowdown in the growth momentum of the economy has given clear indication of the need of policy easing while sliding inflation has opened doors for RBI to further reduce interest rates to revivify economic growth.

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