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Thursday, March 12, 2009

Inflation at 2.43%

Below the RBI projection

The Wholesale price index fall 60 basis point for the week ended 28 February 2009 compared with a week ago. The annual rate of inflation, calculated on point-to-point basis, stood at 2.43% for the week ended 28 February 2009 compared to 3.03% for the previous week and 6.21% during the corresponding week of the previous year.

This was the eighteenth consecutive week when WPI registered a single digit growth. Constant declined in global commodity and oil prices along with fall in manufacturing product assist the southward journey of inflation. The Reserve bank of India projected 3% inflation level by the March 2009. However inflation level has eased below this projection a month before.

Manufactured product one of the major contributor in WPI with 63% weight declined by 0.1% to 199.2 from 199.3 for the previous week. The index for non-metallic minerals rose by 0.05% to 217.1 from 217.0 for the previous week due to marginal increase in the price of cement. However, the index of basic metals alloys and metal products, machinery and machine tools group registered a fall for the week ended 28 February 2009 compared with a week ago. The index for textiles group declined by 0.1 % to 140.4 from 140.5 for the previous week due to lower prices of nylon filament yarn (2%) and hessian & sacking bags (1%).

Another important contributor, primary article index rose by 0.2% to 248.1 from 247.5 for the previous week. In this the for food articles group rose by 0.4% to 244.2 from 243.3 for the previous week due to higher prices of fruits & vegetables and bajra (2% each) and masur (1%). However, the prices of maize, arhar and moong (1% each) declined. Increase in food article index craft an anxiety for the consumer price index.

The index for fuel power light and lubricants group remained unchanged at its previous week's level of 323.5

The constant fall in inflation is expected to continue in 2009 also. Lower inflation rate has provided space for further softening of key interest rates.

India is set for lower inflation and interest rate regime however the effect of lower interest rates has not been reflecting in economy growth. The recent negative IIP (industrial production) numbers are narrating the same story. The anxiety on growth projection has increased inspite of lower inflation.

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