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Thursday, May 14, 2009

Inflation at 0.48%

Heading for lower rate regime

Headline inflation has recorded 0.4% growth during the week ended 2 May 2009. The index has reached to 231.6 from 230.7-mark registered in last week The annual growth rate was 0.48% during the week ended 2 May 2009 compared with 0 70% last week and 8.73% during the week ended 3 May 2008.

The index of primary articles, fuel and manufactured index recorded gain during the week ended 2 May 2009 compared with last week.

The index for this major group rose by 0.4 percent to 254.7 from 253.7 for the previous week. In the group, food articles recorded 0.3% growth and non-food articles recorded 0.8% growth due to higher prices of raw wool (24%), raw rubber and sunflower (6% each), raw cotton (2%) and copra (1%). However, the prices of raw silk (2%) and tobacco (1%) declined.

The index of fuel rose by 0.2 percent to 323 from 323.0 for the previous week due to higher prices of furnace oil and naphtha (3% each) and light diesel oil (1%). However, the prices of bitumen and aviation turbine fuel (1% each) declined.

The index of manufactured index recorded rose by 0.4% during the week ended 2 May 2009.

The index for 'Food Products' group rose by 0.7 percent to 230.5 from 228.9for the previous week due to higher prices of imported edible oil (4%) and sugar (3%). However, the prices of groundnut oil, rice bran oil, gingelly oil and gur (1% each) declined. The index for 'Chemicals & Chemical Products' group rose by 1.3 percent to 217.6 (Provisional) from 214.9 for the previous week due to higher prices of pesticides (33%),benzene (27%), calcium ammonium nitrate n-content (24%) and purified terephthalic acid (pta)(11%). However, the prices of p.v.c. resin (6%) and methanol (2%) declined.

The index for 'Basic Metals Alloys & Metal Products' group rose by 0.1 percent to 255.5 from 255.2 for the previous week due to higher prices of other iron steel (3%) and foundry pig iron and basic pig iron (2% each). However, the prices of lead ingots (4%) and zinc (2%) declined.

Headline inflation recorded fall during the week ended 2 May 2009 compared with a last week. India is heading for lower inflation followed by lower interest rate regime. The apex bank of India has reduced the key rates of interest. Major commercial banks

have started to follow the suit. Banks like SBI, ICICI have announced cut in their prime lending rates. But still there is a pressure on long-term interest rate, which has been adding stress on industry. Higher long-term interest rate always results into higher funding cost for industry. Recent poor industrial production numbers are solid proof of the fragile industry structure. In short there is more space for commercial banks to cut lending rates further, which will boost economy growth.

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